Employers that want to put as much distance between their health plans and markets heavily affected by the Patient Protection and Affordable Care Act (PPACA) underwriting rules may like the idea of trying a level-funded stop-loss plan.
A typical level-funded health stop-loss plan is aimed at an employer with about 20 to 200 lives that wants to self-insure but can’t accept much fluctuation in benefits costs.
The employer puts a set amount of money in a claim fund each month. If claims eat up the money, the stop-loss carrier absorbs the extra costs. If some money is left over at the end of a year, or other designated period, the employers gets money back.
Some of the firms that have been offering level-funded stop-loss arrangements include The Benefit Group Inc., East Coast Underwriters L.L.C., Healthcare Choice L.L.C. and Frenkel Benefits L.L.C.
One challenge may be that some state regulators, the Centers for Medicare & Medicaid Services (CMS) and the parent of CMS, the U.S. Department of Health and Human Services (HHS), see small employer flight to self-funded plans as a potential threat to the fully insured small-group market.
But, today, uncertainty about the King vs. Burwell Supreme Court case may increase some employers’ in self-insurance.
The case appears to hinge only on whether HHS PPACA exchanges have the legal authority under PPACA to offer federal PPACA tax credits to moderate-income consumers, but Justice Anthony Kennedy used a line of reasoning that raised the possibility that he might be open to finding the PPACA exchange program, and the PPACA commercial health insurance underwriting restrictions, to be an example of Congress interfering with state affairs in an unconstitutional way. Observers expect the court to issue a ruling by late June.
The ruling may have no noticeable effect on the commercial health insurance market at all, in any state, or it could disrupt the national individual medical market in ways that would rattle insurers’ ability to serve other markets, such as the small-group market. Even a ruling with a modest effect could pose an obstacle for small employers in HHS exchange states that wanted to shut down their health plans and send the employees into the individual market.
Joseph Berardo Jr., the chief executive officer of MagnaCare, said in an e-mail interview that he sees brokers who understand their states’ stop-loss rules setting up level-funded plans without running into significant compliance issues.
For an employer that knows it can meet the funding requirements, a stop-loss plan can be at least as secure as fully insured plan, Berardo said. ”Stop-loss insurance carriers are some of the largest insurers in the world. This just happens to be another line of business for them.”