The Self-Insurance Insurance Institute of America Inc. (SIIA) is blasting allegations by federal regulators and others who contend that employer flight to the self-insured market could leave insured plans stuck with the sickest employees.
The Patient Protection and Affordable Care Act of 2010 (PPACA) exempts self-funded employers from most of the provisions that apply to insured health plans. The large and midsize employers that offer self-insured plans will have to provide coverage for employees or pay a penalty, but the self-insured plan sponsors will not be subject to the PPACA essential benefits package requirements or the new requirement that insurers offer several specific levels of coverage.
The stop-loss carriers that reinsure the self-funded plans to not have to abide by the new PPACA fee-increase justification requirements, and self-insured plans also will also be exempt from a new tax that PPACA is set to impose on health insurers.
Timothy Stoltzfus Jost, a law professor who represents consumers in proceedings at the National Association of Insurance Commissioners, Kansas City, Mo., is one of a number of commenters who have written to the NAIC, for example, to suggest that stop-loss carriers have always lured healthy groups away from insurers and now will have an increased incentive to do so.
Others are submitting similar comment letters to the federal regulators implementing PPACA and to members of Congress.
The SIIA, Simpsonville, S.C., says the commenters are giving an inaccurate impression of how self-insured plans work.
One common criticism is that small employers that buy self-insurance packages from insurers – especially packages that include stop-loss coverage with very low deductibles, or attachment points – are buying what amounts of conventional health insurance that is free from state regulation.
The SIIA contends that employers do not buy “self-insured packages.”
“When an employer purchases a conventional, fully-insured group health insurance policy, the financial risk and legal liability is transferred to the insurance carrier that issues the policy,” the SIIA says. “By contrast, a self-insured employer that funds its own health plan retains all the risk and liability. The availability of stop-loss insurance does not mitigate the risk assumption of the employer when electing to self-insure.”
The argument that self-insured plans focus on covering healthy groups also is inaccurate, the SIIA says.
Federal laws already prohibit self-funded plan sponsors from picking the most favorable risks, and “there is no evidence that shows that self-insured plans as a group have any different morbidity characteristics from fully insured plans taken as a group,” the SIIA says.
Self-insured plans tend to be cheaper because administrative costs tend to be lower, not because the enrollees are healthier, the SIIA says.