The three federal agencies in charge of implementing the federal Patient Protection and Affordable Care Act of 2010 (PPACA) want to know how small employers’ use of stop-loss programs, or insurance for self-insured health plans, affects the market for fully insured small group coverage.
The agencies — the Internal Revenue Service (IRS), an arm of the U.S. Treasury Department; the Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services (HHS); and the Employee Benefits Security Administration (EBSA), an arm of the U.S. Labor Department — are preparing to issue a 13-question request for information (RFI) about health plan sponsors’ use of stop-loss insurance.
The agencies are especially interested in learning about “the prevalence and consequences of stop-loss insurance at low attachment points,” agency officials say in a preliminary version of the RFI.
The stop-loss RFI is set to appear in the Federal Register Tuesday.
Members of the public will have 60 days after the official Federal Register publication date, officials say.
PPACA AND THE STOP-LOSS MARKET
The Patient Protection and Affordable Care Act of 2010 (PPACA) is supposed to create a new system of health insurance exchange — Web-based health insurance supermarkets — starting in 2014.
If PPACA takes effect on schedule and works as expected, individuals and small groups will be able to use new tax subsidies to buy health coverage that meets exchange standards.
Actuaries, insurance company executives and others have suggested that differences between sectors of the health insurance market could lead to “antiselection,” or the risk that the healthiest individuals and groups will flock to some types of plans and leave other types of plans saddled with the most expensive individuals and groups..
Some employers fund their own health plans, rather than relying on conventional health insurers, but use stop-loss plans to limit their exposure to catastrophic claims, such as huge claims for organ transplants or a large number of big claims resulting from a flu epidemic.
Stop-loss programs cover health plans for claims over a specified “attachment point.”
A plan sponsor thinks of a stop-loss program attachment point roughly the same way an individual health insurance policyholder thinks of a health insurance deductible.
Traditionally, most sponsors of self-insured health plans have been relatively large employers. Today, PPACA has created new interest in self-insured plans, because PPACA exempts self-insured employers from many of the new PPACA rules and mandates.
The Self-Insurance Subgroup, an arm of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., has been looking into arguments that dramatic expansion in the self-insurance market could destabilize the group health market starting in 2014.
At the NAIC’s spring meeting in New Orleans, regulators talked about the possibility that stop-loss sellers could increase interest in self-insuring even more by setting very low attachment points.
THE STOP-LOSS RFI
The federal agencies issuing the stop-loss RFI note that they have little data on stop-loss insurance.
Plans with 100 or more participants need not include information about matters such as attachment points in their annual Form 5500 plan reports, and smaller plans need not file the reports at all, officials say.
“The limited available information suggests that stop-loss insurance is perhaps becoming more common among smaller self-insured plans, but information is not available on the type of stop-loss coverage purchased by plans of various sizes,” officials say.
Officials estimate that about 23% to 27% of the self-insured plans that filed Form 5500 reports from 2000 to 2008 had stop-loss insurance and that about 28% to 29% of the partially insured Form 5500 filers had stop-loss.