A panel at the National Association of Insurance Commissioners (NAIC) today decided against putting new curbs on use of small group health insurance stop-loss arrangements.
The panel — the ERISA Working Group, an arm of the NAIC’s Health Insurance and Managed Care Committee — rejected a stop-loss motion during a session in Washington, at the NAIC’s fall meeting, according to an NAIC session summary.
Some employers provide health benefits by setting up cash reserves, rather than by buying ordinary health insurance. Those employers often buy stop-loss insurance — group health plan reinsurance — to protect themselves against catastrophic losses. Ordinary health insurance typically pays claims that exceed a predetermined “deductible.” In the stop-loss market, the equivalent of a deductible is an “attachment point.” Providers of stop-loss coverage could base the stop-loss program deductibles on an attachment point for each employee, a catastrophic deductible for the plan as a whole, or a both.
Critics of the current stop-loss system note that, in some cases, per-employee attachment points can be as low as $20,000, and that, in some cases, those very low attachment points are about the same as the deductibles in some fully insured policies with very high deductibles. The critics have suggested that the very low attachment points could encourage some cash-strapped small employers to see stop-loss coverage as very high deductible health insurance.
The ERISA Working Group has been looking into the idea of amending the NAIC’s Stop-Loss Insurance Model Act, which was approved in 1995, to increase the per-employee attachment point to $60,000, from $20,000, and the whole-plan deductible to $15,000 times the number of people in the plan, from $4,000 times the number of people in the plan.
Only 3 states — Minnesota, New Hampshire and Vermont — have adopted the entire 1995 model; 18 other states have adopted parts of the model.
The Patient Protection and Affordable Care Act of 2010 (PPACA) exempts self-insured plans from many of the rules that apply to insured group plans. Some observers have argued that letting small employers use a combination of self-insurance and stop-loss arrangements with very low deductibles could help them evade the new PPACA rules.
If small employers self-insure, that could deprive the workers in those plans of protection from much-needed PPACA consumer protection provisions, PPACA supporters say.
If the small employers that self-insure have younger, healthier workers than the small employers that stick with insured plans, that could drive up rates for insured small group plans and destabilize the small group health insurance market, according to advocates of changing the stop-loss rules.
Timothy Jost, a law professor who officially represents consumer interests in NAIC proceedings, sent ERISA Working Group members a copy of a paper by Matthew Buettgens and Laura Blumberg, two Urban Institute researchers, who are predicting that letting small employers try to get around PPACA by self-insuring could drive up the cost of employer coverage for single employees by as much as 25 percent.
The working group included a copy of the paper in its fall meeting packet.
The meeting packet also included notes on recent working group discussions about the stop-loss issue.
During one recent call, for a example, a representative for the Blue Cross Blue Shield Association said the association is not sure what it thinks about the proposed draft guideline changes but wants states to regulate who can buy stop-loss insurance.
Another call participant, Hobson Carroll, a risk management specialist, said he believed that the free market system keeps very small groups from making excessive use of self-insurance.
In practice, very small groups that try to self-insure to get around PPACA mandates will find that self-insuring is more expensive than using fully insured health insurance programs, he said.