By Julian Pecquet and Sam Baker
The Hill, November 3, 2011
Consumer advocate and law Professor Tim Jost on Thursday urged the National Association of Insurance Commissioners to take a “leadership role” in pressing states to address potential gaps in the healthcare law’s applicability. The law’s consumer protections don’t apply to all types of plans, and Jost said those gaps pose problems for both consumers and insurers.
Self-insured plans are exempt from most of the law’s regulations, and policies offered by large employers also don’t have to meet certain requirements. Jost said small businesses are shifting toward self-insurance, so employees will be stuck without benefits Congress intended to provide. There’s also a risk to insurers, he said, because small businesses could drop their self-insured policies and move into the exchanges as soon as one of their workers gets sick.
http://thehill.com/blogs/healthwatch/other/191759-overnight-health-health-budgets-back-in-spotlight
And…
Self-Insurance and the Potential Effects of Health Reform on the Small-Group Market
By Kathryn Linehan
National Health Policy Forum, December 21, 2010
Self-insured employer plans are explicitly exempted from some requirements, though “self-insured” is a term not defined in PPACA (or elsewhere). The exemptions are described below.
• Self-insured plans are not required to provide coverage with minimum essential benefits.
• Individual and small-group plans are required to participate in a risk-adjustment system, but self-insured plans are exempt.
• Self-insured plans are not subject to provisions (specifically, medical loss ratio requirements and review of premium increases) that are intended to limit insurer earnings.
• Starting in 2014, health insurers are required to pay an annual fee to be calculated by the Secretary, but self-insured plans do not have to pay this fee.
In a September 2010 paper, Timothy Stoltzfus Jost described the “threat” of self-insuring to exchanges:
If small businesses with healthy employees can remain “self-insured” until the health of their pool deteriorates and then join the exchange, premiums within the exchange will increase and the exchange will become less viable. If a state opens its exchange to groups above 100, the threat is even greater, as legitimate self-insured plans will seek to insure their employees through the exchange when their experience deteriorates. Moreover, the self-insured plans that have proven most adept at providing high-quality benefits to their employees at low cost (which exist at many large firms) are likely to remain independent of the exchange, while less successful self-insured plans turn to the exchange for coverage.
https://www.nhpf.org/uploads/announcements/IB840_PPACASmallGroup_12-21-10.pdf
Comment:
By Don McCanne, MD
Well over half of all employees who obtain their health insurance through their work are enrolled in self-insured plans – plans in which health care bills are paid by the employer rather than by a private insurer (except for stop-loss insurance). By self-insuring, employers escape state insurance regulation, and they are exempt from many of the provisions of the Affordable Care Act.
These exemptions may benefit the employers, but they expose the employees and their families to greater risks, potentially impairing health care access and increasing the cost sharing burden, including costs for care that the plan is not required to cover.
Some say that employers will not compromise their self-insured plans since they would be used to attract better qualified employees, but we are already seeing a shift of risk from employers to employees through greater cost sharing and other plan innovations. As mentioned in a message earlier this week, there has been an increase in the sale of deceptive “self-insured packages” which are merely stop-loss plans that look like health insurance, but that are exempt from the regulatory oversight of private health plans. As health care costs continue to rise, employers surely will continue to leverage lax self-insured rules to accrue to their own benefit, at a cost to their employees.
For those employers who end up facing higher costs in their self-insured plans resulting from deterioration in the average health status of their employee pools, they have the out of transferring their employees to the new state insurance exchanges. Of course, subjecting the exchanges to adverse selection (enrolling more costly patients) will drive up premiums for everyone else enrolled in the exchange plans.
As we have said many times before, the fundamental flaw in the reform process was that Congress elected to build on our highly dysfunctional, fragmented system of financing health care. It wasn’t working before, and the tweaks in the Affordable Care Act are not near enough to make it work now.
We need to start over with an improved Medicare that covers everyone.