In a previous post, we mentioned that younger and healthier constituents may find their insurance premiums increasing as the Patient Protection and Affordable Care Act (PPACA), commonly called Obamacare, tries to protect seniors from losing coverage due to health or cost issues.  Interestingly, we are now reading that “Federal and state officials and consumer advocates have grown worried that companies with relatively young, healthy employees may opt out of the regular health insurance market to avoid the minimum coverage standards in President Obama’s sweeping law, a move that could drive up costs for workers at other companies.”

“Companies can avoid many standards in the new law by insuring their own employees, rather than signing up with commercial insurers, because Congress did not want to disrupt self-insurance arrangements that were seen as working well for many large employers…In a report to clients last year, SNR Denton, a law firm, wrote, ‘Faced with mandates to offer richer benefits with less cost-sharing, small and midsize employers in particular are increasingly considering self-insuring.’”

“Self-insurance was already growing before (President) Obama signed the law in 2010, making it difficult to know whether the law is responsible for any recent changes. A study by the nonpartisan Employee Benefit Research Institute found that about 59 percent of private sector workers with health coverage were in self-insured plans in 2011, up from 41 percent in 1998.”

“But experts say the law makes self-insurance more attractive for smaller employers. When companies are self-insured, they assume most of the financial risk of providing health benefits to employees. Instead of paying premiums to insurers, they pay claims filed by employees and health care providers. To avoid huge losses, they often sign up for a special kind of “stop loss” insurance that protects them against very large or unexpected claims, say $50,000 or $100,000 a person.”

“Stop-loss insurers can and do limit the coverage they provide to employers for selected employees with medical problems. As a result, companies with less healthy work forces may find self-insuring more difficult…Large employers with hundreds or thousands of employees have historically been much more likely to insure themselves because they have cash to pay most claims directly.  Now, employee benefit consultants are promoting self-insurance for employers with as few as 10 or 20 employees.”  Especially if those employees are young and healthy.

“Starting in 2014, most Americans will be required to have medical coverage. Under the law, health insurers cannot deny coverage or charge higher prices to people who are sick. But stop-loss insurance, for catastrophic claims, is not regulated as health insurance.  Stop-loss carriers often require employers to identify employees who have been treated for certain expensive conditions, including H.I.V. or AIDS, cancer, diabetes, obesity, sickle-cell anemia, heart attack, stroke and complications of pregnancy. The carriers may limit or deny coverage for those conditions or those individuals. ”

“The Obama administration is investigating the use of stop-loss insurance by employers with healthier employees, and officials said they were considering regulations to discourage small and midsize employers from using such arrangements to circumvent the new health care law.”

Lastly, we noted this interesting difference in perspective:

“In an interview, Dave Jones, the California insurance commissioner, said, ‘We see a disturbing increase in the marketing of stop-loss insurance to small employers with healthy employees.'” However, “Michael W. Ferguson, the chief operating officer of the Self-Insurance Institute of America, a trade group for companies in the self-insurance marketplace, said, ‘We don’t think there is a problem.’”

What do you think?  Does this trend concern you?  Do you think this will be a problem for you?  Please share your thoughts in the comments below, or on our Facebook page.

Add Comment