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Consumer Rep Sees Industry Divided on Stop-Loss

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Timothy Jost

The people who help small employers set up and run small self-funded health plans have been lobbying to keep the current stop-loss insurance guidelines in place.

Timothy Stoltzfus Jost, a law professor who speaks for consumer interest in proceedings at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., says he thinks that, in spite of the visibility of the campaign to keep stop-loss rules more or less the same, the health insurance industry itself is divided about stop-loss market rules.

Some health insurers already sell administrative services and stop-loss insurance to small employers, and those carriers seem to support the idea of maintaining or expanding very small groups’ access to the stop-loss market, Jost said in an e-mail interview.

But “some that are unable to play in the stop-loss market…see this as a disaster, with themselves ending up the victims of cherry picking by stop-loss insurers,” Jost said.”It’s like steroids in sports. Once one competitor gets in, others can’t afford not to.”

The Battle

Employers that self-insure against health risks often buy stop-loss insurance — insurance for group health plans — to protect themselves against catastrophic losses.

An NAIC stop-loss model adopted in 1995 recommends that stop-loss insurers discourage very small employers from viewing stop-loss as the equivalent of high-deductible major medical coverage by setting the stop-loss deductible for a claim filed by a single employee at a small self-insured plan at $20,000,and by setting a deductible of $4,000 times the number of people in the plan for the plan as a whole. Observers have pointed out that, in some cases, the lowest stop-loss deductibles may be on par with the deductibles required by high-deductible major medical plans.

Analysts in the Washington office of Deloitte looked at plans with 100 or more employees in 2011 and found that the percentage of employers that had plans that were partly or wholly self-insured ranged from 27% at employers with 100 to 199 workers to 76% at employers with 5,000 or more workers.

The Patient Protection and Affordable Care Act of 2010 (PPACA) exempts self-insured plans from many PPACA requirements, such as a minimum medical loss ratio (MLR) provision that requires insurers to spend at least 80% of small group plan revenue on health care and quality improvement efforts.

Some have suggested that employers with as few as 20 employees may now choose to try to escape from PPACA benefits rules by self-insuring.Critics say that the healthiest small employers will be more likely to self-insure, and that the flight of the best risks to the self-insured market could lead to escalating claims costs and premium increases in the insured small group market.

NAIC working groups are  talking about the idea of increasing the minimum per-employee or whole-plan small group stop-loss deductibles. Christina Goe, a Minnesota regulator, has suggested that the NAIC ought to consider revising the stop-loss minimums primarily because they were set long ago and now appear to be out of sync with the health insurance market.

Supporters of keeping the current small group stop-loss rules the same argue that sponsors of self-insured plans are getting high-quality benefits in an efficient, low-cost fashion, and that interfering with the stop-loss market would drive up the cost of health benefits and reduce benefit plan flexibility at a time when the government is trying to encourage employers to maintain and expand their health plans.

Who Could Lose? 

Jost said he is basing his assessment of the small group stop-loss climate on statements the insurers’ representatives have made during NAIC meetings and on written comments the companies are submitting to NAIC panels.

Brokers say many health insurers have used the PPACA minimum MLR provision to justify slashing sales commissions by 50% or more.

If the micro self-insured plan market takes off, that could help some agents and brokers, by giving them access to new business that is not affected by the PPACA minimum MLR requirements, Jost said.

But rapid expansion in the micro self-insured plan market could hurt producers who work mainly in the fully insured plan market, Jost said.

“In the end,” Jost said, “the biggest losers will be small businesses, which will do well as long as their workers are healthy, then face very high rates when they are not.”