Federal regulators are trying to get what they regard as nice, civilized products into the excepted benefits category. Major medical insurers seem to be unimpressed.
Medical insurers’ lack of enthusiasm for, and understanding of, the proposed “limited wraparound” benefits product line has surfaced in comments trade groups have filed in response to draft regulations released in December.
The groups are reacting to regulations the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA) and the U.S. Department of Health and Human Services (HHS) developed while fleshing out Patient Protection and Affordable Care Act of 2010 (PPACA) regulations.
Traditionally, federal regulators have used the term “excepted benefits” to refer to health-related insurance plans, and other health-related products, that are exempt from the major medical plan standards included in laws such as the Employee Retirement Income Security Act of 1974 (ERISA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
In The IRS, EBSA and HHS have been working on regulations that would reconcile the excepted benefits system with PPACA. Regulators want to keep insurers or other parties from using cleverly designed excepted benefits products that would create a new class of limited-benefit medical insurance plans that would be exempt from the PPACA annual benefits limits, the PPACA essential health benefits (EHB) package coverage requirements, the PPACA preventive services coverage mandate, and other PPACA provisions. In some cases, regulators will be requiring insurers to offer certain types of excepted benefits products only to workers who say they have major medical coverage.
While doing that, the regulators came up with the idea of creating a limited wraparound product that would wrap around PPACA-compliant major medical coverage. The coverage would have to be designed to fill gaps in primary coverage, provide meaningful benefits, and cost less than about $2,500 per employee.
Regulators would keep access to the product, small at first, by making it available only to part-time workers who had PPACA-compliant individual coverage, were eligible for employer-sponsored group coverage, and were not using their employer’s group coverage, or to employers that offer PPACA Multi-State Plan (MSP) coverage. The PPACA MSP program gives an insurer the ability to sell a plan regulated mainly by the U.S. Office of Personnel Management (OPM) through PPACA exchanges in multiple states.
In theory, for-profit companies like UnitedHealth Group Inc. (NYSE:UNH) and Aetna Inc. (NYSE:AET) could offer MSP coverage. In practice, the only significant provider of exchange MSP coverage has been a consortium of Blue Cross and Blue Shield plans.
Kris Haltmeyer of the Blue Cross Blue Shield Association has filed one comment letter on the proposal, and Cindy Goff and Thomas Wilder have submitted a comment letter for America’s Health Insurance Plans (AHIP). To see what insurers are saying about the limited wraparound plan concept, read on.
1. Health insurers are afraid the wraparound plans would disrupt the existing excepted benefits markets.
Traditionally, the AHIP commenters say, excepted benefits have been limited in scope. Some of the most popular excepted benefits, for example, are dental vision, vision coverage and long-term care insurance (LTCI), the AHIP commenters write.
In the new limited wraparound proposal, regulators seem to be thinking of a product that would not be limited in scope, the commenters say.
Moreover, if limited wraparound products were popular and poorly designed, they could disrupt the existing major medical market, the commenters add.
“For example,” the commenters say, “the departments should be careful not to provide incentives for shifting higher risk individuals to the individual market.” A supplemental product could also change the way the insureds use their underlying medical coverage, the commenters say.
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2. Health insurers are afraid the wraparound products would suddenly turn a federal agency, OPM, into a major excepted benefits regulator.
Traditionally, the AHIP commenters say, states have regulated excepted benefits.
“We are concerned about the role the Office of Personnel Management (OPM) in reviewing and approving wraparound coverage offered in conjunction with a MSP and potential conflicts with state regulation,” the commenters say.
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3. Health insurers have no idea how federal regulators think the products would work.
Haltmeyer writes that insurers are missing basic information on how the wraparound products would work.
From the proposed rule, for example, it’s not clear how OPM would regulate the products, what kind of major medical coverage would go with the products, or whether an entity would have to be an insurer to offer the wraparound products, Haltmeyer says.
The federal regulators should at least require an entity that offers wraparound coverage to keep an MSP issuer’s proprietary data out of the hands of competitors, Haltmeyer says.
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