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Life Health > Health Insurance

Association Plans Face Solvency Challenges

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NU Online News Service, March 12, 2004, 5:59 p.m. EST – Regulators had better make sure that national association health plans have enough cash and other resources to pay claims.[@@]

Mila Kofman, Eliza Bangit and Kevin Lucia, researchers at Georgetown University, give that assessment in a paper on single-state “multiple employer welfare arrangements” and the implications for congressional proposals to allow groups to form national MEWAs, or association health plans.

Today, large and midsize employers can form self-funded health plans that are exempt from most state health insurance regulations.

Most small employers have to buy coverage from state-regulated health insurers, but some states let employers try to save money by teaming up to form self-funded plans that serve more than one company.

Regulators in California, Michigan and Oklahoma have found that they often end up having to rescue single-state MEWAs from financial problems, the Georgetown researchers report.

Regulators cope with MEWA crises by persuading licensed insurers to take over, pressing the professional and trade groups that back the MEWAs to make up for shortfalls, and asking the sponsoring groups to keep doctors and hospitals from going after patients to collect on claims that were supposed to be paid by the MEWAs, the researchers write.

To some extent, the researchers write, the participating employers are getting what they pay for.

“On one hand, weaker standards than the ones applicable to insurers may make the health insurance offered by associations less expensive,” the researchers write. “On the other hand, lower solvency requirements increase the risk of financial failure?. State and federal policymakers seeking to encourage new self-insured group purchasing arrangements must recognize that sacrificing solvency to save costs puts employers and workers at great risk.”


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