PPACA: Sun Shines on Stop-Loss Market

Debra Ness writes on behalf of the National Partnership for Women & Families, Washington, says her group already is seeing stop-loss marketers sell the product as a tool for evading PPACA consumer and market protections. 

“The increase in the use of stop-loss insurance with low attachment points by self-insured small employer plans could potentially undermine the intent,” of the law, Ness says.

Researchers at RAND Corp., Santa Monica, Calif., have published a study suggesting that PPACA is unlikely to lead to a big jump in small employers’ use of self-insurance and stop-loss programs, but the researchers assumed in that study that the typical specific attachment point is $75,000 per employee, Ness says.

Today, however, insurers and others are emphasizing that their specific attachment points can be as low as $10,000, Ness says.

Some reading the comments might assume that benefit plan administrators would be in favor of expansion of stop-loss programs and self insurance and that insurers would oppose increased use of stop-loss, but, in reality, many companies that sell health insurance are also active in the self-funded plan market, according to Marc Marion, a vice president at American Fidelity Assurance Company, Oklahoma City.

“One strong indicator of the prevalence of self-funding is that the majority of the companies identified as large health insurers provide their service to far more self-insured employees than they do to fully insured certificate holders,” Marion says. “Measured on the basis of ‘covered lives,’ these insurers would be more properly described as third party administrators. For example, in Aetna’s most recently stated required annual financial statement … they describe their total population of commercial benefit members to be 16,626,000; of these 11,868,000, or 71.4%, were in employer self-funded plans, not covered by health insurance.”

Some commenters, such as the National Partnership, 13 of the individuals who represent consumer interests in NAIC proceedings, and a coalition of advocacy groups led Consumers Union, Yonkers, N.Y., say they would like to see federal agencies help regulate small groups’ use of stop-loss insurance.

Other commenters, such as NAHU and the Alliance of Community Health Plans, Washington, say they think the NAIC is the appropriate source for guidance on the matter.

Many commenters offer general information about the stop-loss market.

Alissa Fox, a senior vice president at the Blue Cross Blue Shield Association, Chicago, says public reports show that about 12% to 15% of group plan claims covered by stop-loss programs reach the attachment point.

In 2011, the loss ratio for stop-loss was 73.8%, with an average per-member per-month premium of $21.92, Fox says.

Some benefits firms have provided specific administrative cost estimates.

At Mid-American Benefits, Lee Johnson says his firm’s typical administration fee for a self-insured plan is $17 per employee per month (PEPM). A typical pre-certification vendor charges $2 PEPM, and a typical preferred provider organization charges $5 PEPM, for a total of about $25 PEPM, he says.

The administrative costs are much lower than for Medicare, Medicaid or typical fully insured plans, Johnson says.

Nicole Andelin of CNIC Health Solutions Inc., Greenwood Village, Colo., says about 4% of the typical CNIC client’s plan spending goes toward paying administrative and network access fees.

Stop-loss fees and stop-loss broker commissions total about 10% of a self-insured client’s plan costs, Andelin says.

Correction: An earlier version of this article described NAHU’s location incorrectly. NAHU has moved to Washington.