Earlier this year, I wrote about how the Treasury Department/IRS had taken a keen interest in stop-loss insurance as evidenced by a request for comment notice regarding PPACA code section 162 m. At issue is how stop-loss insurance figures into new tax rules mandated by the health care reform law restricting the tax deduction health insurance companies can take for compensation paid to certain employees.
More precisely, Treasury/IRS is suspicious that self-insured health plans with low attachment point stop-loss policies are really fully-insured plans in disguise. This was made clear in a meeting this week with senior Treasury Department and IRS officials when Treasury’s point person on the issue commented that “obviously products that look, smell and breathe like health insurance have our attention.”
While the audience was new the line of interrogation was not.
In meetings with HHS and DOL officials late last year in connection with the preparation of PPACA-mandated reports on self-insured group health plans, pointed questions were raised about “sham self-insurance,” which has become a popular catch phrase among the regulator class.
Of course, this suspicion did not materialize immaculately. The HHS/DOL team volunteered that they had been lead to believe that sham self-insurance is commonplace. While they did not disclose their sources, it is reasonable to believe that our friends from AHIP were among those whispering in their ears.
Getting back to the meeting this week, Treasury/IRS picked up where HHS and DOL left off although without any obvious bias. Stop-loss was clearly a new animal to them and my sense was that they were truly interested to understand it better.
Joining me was the “Seal Team Six” of stop-loss insurance experts who deftly responded to questions about low attachment point stop-loss polices by pointing out that this does fit the business model of carriers which control the vast majority of the marketplace.
As part of this discussion it was pointed out that contrary to the hype that small employers are moving to self-insurance in big numbers (and buying low attachment point policies) to avoid PPACA regulatory requirements, the facts don’t bear this out. In fact, the carrier representatives noted that that the lack of claims data is a major hurdle for companies with fewer than 100 employees for making the switch to self-insurance. They reported that the real growth in the stop-loss marketplace is actually coming from larger employers who may have not utilized stop-loss insurance in the past but are buying it now in response to unlimited lifetime limits.
Oh and by the way, the contention that there is a motivation among smaller employers to self-insure to avoid new regulatory requirements is specious because for non-grandfathered self-insured plans there really are no significant regulatory advantages.
We also highlighted the fact that states regulate stop-loss insurance separately than health insurance, PPACA regulatory guidance has acknowledged the difference, and legal precedent supports this position. All in all we made a pretty compelling case why stop-loss insurance should not be construed as health insurance.
While a contrary interpretation would create tax complications for stop-loss carriers, the broader concern is that if the IRS comes out with a new definition of stop-loss insurance this could completely disrupt the current regulatory environment.
Our audience maintained poker faces throughout the meeting (which I suppose is typical of tax people) so it was tough to get a read on how they were digesting our input. We’ll know for sure when the proposed rule comes out, but that won’t like be published for a while because the new compensation rules are not scheduled to take effect until 2013.
In the meantime, it should be instructive to those in the self-insurance industry that federal regulators are watching what is going in the marketplace. For companies pushing the envelope with “innovative” stop-loss products beware that you may be inviting negative attention.
Thursday, May 26, 2011
Sunday, April 3, 2011
Self-Insurance Receives Seal of Approval
For the past several months I have been managing expectations about the content of separate reports on self-insured group health plans being developed by DOL and HHS. Or more to the point, I have preparing people for reports that conclude all sorts of awful things about self-insured plans. Not that I believe such anticipated criticisms are valid, but rather that it was obvious that self-insurance was “set up” to take a hit based on the PPACA legislative language mandating the studies, in particular the HHS study on the large group market. The stated objective of this study was to compare self-insured plans with fully-insured plans, which is fair enough. But Section 1254 instructs the HHS to investigate multiple perceived problems with self-insured plans while not including similar guidance for fully-insured plans, therefore essentially setting up a one-way fishing expedition. And by the way, this section along with the preceding section mandating the DOL report, were inserted at the last minute as part of the reconciliation process almost certainly at the request of the health insurance industry. So the fix was in from the jump. It has also been my view that there is a negative bias toward self-insurance within the regulatory agencies which would taint the review and reporting process. I say this based on fact that some key officials within these department have previously worked for members of Congress and/or think tanks that have been critical of self-insurance. My suspicion of such bias was heightened after a meeting with HHIS-contracted researchers who asked a series of very pointed about self-insurance that seemed to be “planted” by those with an interest in making self-insurance look bad. The researchers took a particular interest in what they termed “sham self-insurance,” translated to mean self-insured health plans utilizing stop-loss insurance with low attachment points. Now this line of questioning was easily dealt with of course, but we did get the impression that this could well be a situation where the agencies were digging for evidence to support pre-determined conclusions. But apparently there was not a thumb on the scale after all based on a review of the final reports that were released this week. So much for my prescient reputation! The main concern about the DOL report was that they would use bad and/or insufficient data to conclude there are solvency problems with self-insured health plans. But the agency acknowledged that they could not reach any policy conclusions due the lack of quality data. The HHS report appeared to be an opportunity for a host of self-insurance criticisms to be validated by the federal government. You know, the regular canards such as self-insured plans are less costly than traditional issuance because they deny lots of claims and offer skimpy benefits. But I am sure to the consternation of our friends at AHIP and others with market share or other motivations, the HHS report effectively refuted all of the common self-insurance criticisms by concluding little or no difference as compared to fully-insured plans. And for the icing on the cake, consider a little nugget tucked into an appendix of the DOL report which noted that from 2009 to 2010 for employers with more than 200 covered lives, the average fully-insured premium increased by $808 compared to an average increase of $248 for self-insured premiums. So instead of getting branded with a regulatory scarlet letter, self-insurance has effectively received a seal of approval. What an interesting turn of events.
Friday, March 25, 2011
A False Alarm at the IRS for TPAs
We normally report on actual legislative/regulatory developments, but this post discusses a false alarm coming from the IRS that appeared to subject health care TPAs to burdensome new reporting requirements in order to help head off any potential industry confusion.
At issue is Department of Treasury Final Rule 6050 W, which was published way back in August of last year. The rule is intended to define “third party transaction settlement organizations” in furtherance of the IRS’ goal of creating a mechanism to better track the flow of money within the economy.
A section in the preamble labeled “Healthcare Networks and Self-Insured Arrangements” got the belated attention of small circle of IRS observers who have a health care focus. The actual preamble language for this section (just three paragraphs) is as follows:
The proposed regulations included an example to demonstrate that health insurance networks are outside the scope of section 6050W because a health care network does not enable the transfer of funds from buyers to sellers. Instead, health carriers collect premiums from covered persons pursuant to a plan agreement between the health carrier and the covered person for the cost of participation in the health care network. Separately, health care carriers pay healthcare providers to compensate providers for services rendered to covered person pursuant to provider agreements. This example is retained in the final regulations.
A commenter requested that the final regulations clarify that a self-insurance arrangement is also outside the scope of Section 6050W. According to the commenter, a typical self-insured arrangement involves a health insurance entity, health care providers, and the company that is self-insuring. The company submits bills for services rendered by a health care provider to the health insurance entity. The health insurance entity pays the healthcare provider the contracted rate and then debits the self-insuring company’s bank account for the payments made to the healthcare providers.
This suggestion was not adopted because this arrangement could create a third party payment network of which the health insurance entity is the third party settlement organization to the extent that the health insurance entity effectively enables buyers (the self-insuring companies) to transfer funds to sellers of healthcare goods or services. If so, payments under a self-insurance arrangements are reportable provided the arrangement meets both the statutory definition of a third party payment network and de minimis threshold (that is, for a given payee, the aggregate payments for year exceed $20,000 and the aggregate number of transactions exceeds 200).
First, it was curious that the IRS received a single comment regarding self-insurance. Moreover, the commentator described self-insured arrangements in an odd way by using the term “health insurance entity” in an apparent reference to TPAs
Based on this interpretation, it would seem that the IRS did construe TPAs as third party payment networks. As a practical matter, this would mean that TPAs would have to expand their current 1099 Misc. reporting procedures to include payments to providers broken down on a monthly basis, which would be complicated and burdensome.
But upon a more detailed legal review of the full text of the regulations, it was concluded that TPAs did not meet the statutory definition of third party payment networks. One of the key considerations is that it is the employer and not the TPA which contracts with provider networks.
In this regard, it seems that the IRS may have indeed wanted to make TPAs subject to the rule, but the statutory language does appear not support this intent, possibly due to ignorance on the part of the Agency on how self-insured health plans operate and the role of the TPA.
Of course, it’s not uncommon for IRS rules to be tested in court so we will be watching to see if any enforcement actions and/or legal challenges arise on this issue.
At issue is Department of Treasury Final Rule 6050 W, which was published way back in August of last year. The rule is intended to define “third party transaction settlement organizations” in furtherance of the IRS’ goal of creating a mechanism to better track the flow of money within the economy.
A section in the preamble labeled “Healthcare Networks and Self-Insured Arrangements” got the belated attention of small circle of IRS observers who have a health care focus. The actual preamble language for this section (just three paragraphs) is as follows:
The proposed regulations included an example to demonstrate that health insurance networks are outside the scope of section 6050W because a health care network does not enable the transfer of funds from buyers to sellers. Instead, health carriers collect premiums from covered persons pursuant to a plan agreement between the health carrier and the covered person for the cost of participation in the health care network. Separately, health care carriers pay healthcare providers to compensate providers for services rendered to covered person pursuant to provider agreements. This example is retained in the final regulations.
A commenter requested that the final regulations clarify that a self-insurance arrangement is also outside the scope of Section 6050W. According to the commenter, a typical self-insured arrangement involves a health insurance entity, health care providers, and the company that is self-insuring. The company submits bills for services rendered by a health care provider to the health insurance entity. The health insurance entity pays the healthcare provider the contracted rate and then debits the self-insuring company’s bank account for the payments made to the healthcare providers.
This suggestion was not adopted because this arrangement could create a third party payment network of which the health insurance entity is the third party settlement organization to the extent that the health insurance entity effectively enables buyers (the self-insuring companies) to transfer funds to sellers of healthcare goods or services. If so, payments under a self-insurance arrangements are reportable provided the arrangement meets both the statutory definition of a third party payment network and de minimis threshold (that is, for a given payee, the aggregate payments for year exceed $20,000 and the aggregate number of transactions exceeds 200).
First, it was curious that the IRS received a single comment regarding self-insurance. Moreover, the commentator described self-insured arrangements in an odd way by using the term “health insurance entity” in an apparent reference to TPAs
Based on this interpretation, it would seem that the IRS did construe TPAs as third party payment networks. As a practical matter, this would mean that TPAs would have to expand their current 1099 Misc. reporting procedures to include payments to providers broken down on a monthly basis, which would be complicated and burdensome.
But upon a more detailed legal review of the full text of the regulations, it was concluded that TPAs did not meet the statutory definition of third party payment networks. One of the key considerations is that it is the employer and not the TPA which contracts with provider networks.
In this regard, it seems that the IRS may have indeed wanted to make TPAs subject to the rule, but the statutory language does appear not support this intent, possibly due to ignorance on the part of the Agency on how self-insured health plans operate and the role of the TPA.
Of course, it’s not uncommon for IRS rules to be tested in court so we will be watching to see if any enforcement actions and/or legal challenges arise on this issue.
A New "Life Line" for Group Workers' Comp. Funds in New York
In the wake of several high profile group workers’ compensation funds (SIGs) failures a few years ago, the future for other SIGs operating in that state has been looking bleak.
With the state on the hook for unpaid claims totaling between $300 million and $800 million (depending if you believe industry or government estimates) , policy-makers were formally recommending that most funds be shut down and impose such rigorous new regulations on the remaining funds that it would be almost impossible for them to continue to operate.
But just as the obituary for the state’s SIG industry was being written, the conversation has apparently turned from focusing on shutting everything down to finding a solution for letting the well run SIGs continue thanks to an effective lobbying campaign initiated by industry leaders and Group participants.
Specifically, a serious proposal has been floated to allow SIGs to post some form of security in amounts calculated based in their anticipated liabilities to satisfy regulatory concerns about solvency issues going forward.
This proposal may well serve as the framework for a solution, but there are key details which still need to be resolved in order secure “buy in” from both the state and the industry.
The first detail to determine how the security amount should be calculates so that it satisfies regulator concerns but still allows funds sufficient access to cash to pay claims. This is not such an important issue for well-established SIGs with large cash reserves, but is critical to those SIGs that have not had the opportunity to build up such large reserves.
Another open question is the specific "security vehicle" the state would require and the additional transactional expense to the Group. Industry experts have expressed concerns about surety bonds that are fully secured with irrevocable letters because the bond underwriter has the LOC in their hand, so SIGs could never use that cash until it is given back and then replaced with a lesser LOC (assuming it goes down), which can be a difficult process and can be further complicated if the state remains inflexible to changing requirements that could occur depending on cash needs.
As an alternative, it has been suggested the security vehicle be in the form of a restricted investment/ cash account that would require signoff by the state Workers’ Compensation Board but is not wrapped up in an instrument such as an LOC or surety bond.
Another alternative suggestion would be to utilize Reg 114 trusts in which the reinsurer post the cash, freeing up SIG assets to capitalize a captive.
We’ll see how all this plays out but at least there is a viable “lifeline” in the water for the state’s well run SIGs.
In the meantime, we are aware that the state has received proposals for loss portfolio transfer arrangements in order transfer future liabilities back to the private sector, but out sources tell us that disagreement regarding the amount of the liabilities has prevented any deals from being finalized so far
Finally, we continue to wait on an appeal from a State Supreme Court ruling that determined it was constitutional for the state to assess member companies of financially solvent SIGs for the claims liabilities incurred by now insolvent funds.
This should be an easy ruling assuming an objective review of the law, but this is New York after all, so stay tuned. We will report on the ruling when it is announced.
With the state on the hook for unpaid claims totaling between $300 million and $800 million (depending if you believe industry or government estimates) , policy-makers were formally recommending that most funds be shut down and impose such rigorous new regulations on the remaining funds that it would be almost impossible for them to continue to operate.
But just as the obituary for the state’s SIG industry was being written, the conversation has apparently turned from focusing on shutting everything down to finding a solution for letting the well run SIGs continue thanks to an effective lobbying campaign initiated by industry leaders and Group participants.
Specifically, a serious proposal has been floated to allow SIGs to post some form of security in amounts calculated based in their anticipated liabilities to satisfy regulatory concerns about solvency issues going forward.
This proposal may well serve as the framework for a solution, but there are key details which still need to be resolved in order secure “buy in” from both the state and the industry.
The first detail to determine how the security amount should be calculates so that it satisfies regulator concerns but still allows funds sufficient access to cash to pay claims. This is not such an important issue for well-established SIGs with large cash reserves, but is critical to those SIGs that have not had the opportunity to build up such large reserves.
Another open question is the specific "security vehicle" the state would require and the additional transactional expense to the Group. Industry experts have expressed concerns about surety bonds that are fully secured with irrevocable letters because the bond underwriter has the LOC in their hand, so SIGs could never use that cash until it is given back and then replaced with a lesser LOC (assuming it goes down), which can be a difficult process and can be further complicated if the state remains inflexible to changing requirements that could occur depending on cash needs.
As an alternative, it has been suggested the security vehicle be in the form of a restricted investment/ cash account that would require signoff by the state Workers’ Compensation Board but is not wrapped up in an instrument such as an LOC or surety bond.
Another alternative suggestion would be to utilize Reg 114 trusts in which the reinsurer post the cash, freeing up SIG assets to capitalize a captive.
We’ll see how all this plays out but at least there is a viable “lifeline” in the water for the state’s well run SIGs.
In the meantime, we are aware that the state has received proposals for loss portfolio transfer arrangements in order transfer future liabilities back to the private sector, but out sources tell us that disagreement regarding the amount of the liabilities has prevented any deals from being finalized so far
Finally, we continue to wait on an appeal from a State Supreme Court ruling that determined it was constitutional for the state to assess member companies of financially solvent SIGs for the claims liabilities incurred by now insolvent funds.
This should be an easy ruling assuming an objective review of the law, but this is New York after all, so stay tuned. We will report on the ruling when it is announced.
Stop-Loss Insurance, Reinsurance and "Partially Self-Insured" -- We Need to Talk
Forgive me for stating the obvious, but words mean things. I make this seemingly odd comment because I continue to observe a couple words being misused by self-insurance industry professionals on a regular basis and we all need to get on the same page.
Perhaps most aggravating is the term “partially self-insured,” which continues to get tossed around to describe self-insured health plans that utilize stop-loss insurance. Of course there is no such thing as being “partially” self-insured so the term is sloppy at best and can actually be harmful.
I say harmful because from a lobbying perspective, we are continually emphasizing the distinction between fully-insured and self-insured health plans. This “partial” description is often thrown back in our face in attempt to undermine our public policy and legal arguments, so this objection to the term is strictly academic. And those who use it against us have picked it up….from us!
The more subtle yet equally problematic imprecise word choice is when “reinsurance” is used interchangeably with “stop-loss” insurance. Reinsurance involves an insurance contract between two insurance entities, so by saying reinsurance when you really mean stop-loss insurance this implies that self-insured employers are insurance entities, which confuses policy-makers and has created legal uncertainty in some cases. Again, we have only ourselves to blame.
And that concludes our self-insurance vocabulary lesson (and sermon) for the day.
Perhaps most aggravating is the term “partially self-insured,” which continues to get tossed around to describe self-insured health plans that utilize stop-loss insurance. Of course there is no such thing as being “partially” self-insured so the term is sloppy at best and can actually be harmful.
I say harmful because from a lobbying perspective, we are continually emphasizing the distinction between fully-insured and self-insured health plans. This “partial” description is often thrown back in our face in attempt to undermine our public policy and legal arguments, so this objection to the term is strictly academic. And those who use it against us have picked it up….from us!
The more subtle yet equally problematic imprecise word choice is when “reinsurance” is used interchangeably with “stop-loss” insurance. Reinsurance involves an insurance contract between two insurance entities, so by saying reinsurance when you really mean stop-loss insurance this implies that self-insured employers are insurance entities, which confuses policy-makers and has created legal uncertainty in some cases. Again, we have only ourselves to blame.
And that concludes our self-insurance vocabulary lesson (and sermon) for the day.
Wednesday, March 23, 2011
Big Win for Captives in the Big Sky State -- And Related News
The Montana State Legislature only meets for two months every two years so getting a bill passed requires a certain amount of precision. So it is particularly impressive that legislation to significantly improve the state’s captive insurance statute cleared the House and Senate by near unanimous votes and is expected to be signed into law by the governor.
Among other things, the legislation allows for the formation of incorporated cell and special purpose captives, which will make Montana one of the most progressive captive domiciles in the United States.
The interesting backstory is the amount of meaningful consultation that took place between industry proponents and key regulators within the state auditor’s office in developing the legislative language. There was genuine push and pull over the course of several meetings spanning several months. The final product met industry’s objective in creating new opportunities for captive formations, while incorporating sufficient safeguards to provide the regulators with a level of comfort.
We will now be watching to see if companies take advantage of the new law.
In related news, an incorporated cell captive bill is now pending in the Vermont state Legislature. Perhaps they were inspired by Montana.
The long slog continues in South Carolina to push through captive legislation dealing with incorporated cell captives and other updates to the statute there. The outcome still remains uncertain but headwinds seem to prevail.
Rounding out our domicile legislative round-up, a captive bill has been introduced in the Tennessee Legislature that was put together by taking the best provisions from captive laws in multiple domiciles. It’s too early to say whether the legislation will pass this year, but if it does Tennessee is sure to attract national attention.
A new era of captive regulatory structures seems to be emerging across the country. Will our industry’s “big thinkers” be up to the challenge on delivering the next generation of innovative ART programs to prove the potential is real?
Among other things, the legislation allows for the formation of incorporated cell and special purpose captives, which will make Montana one of the most progressive captive domiciles in the United States.
The interesting backstory is the amount of meaningful consultation that took place between industry proponents and key regulators within the state auditor’s office in developing the legislative language. There was genuine push and pull over the course of several meetings spanning several months. The final product met industry’s objective in creating new opportunities for captive formations, while incorporating sufficient safeguards to provide the regulators with a level of comfort.
We will now be watching to see if companies take advantage of the new law.
In related news, an incorporated cell captive bill is now pending in the Vermont state Legislature. Perhaps they were inspired by Montana.
The long slog continues in South Carolina to push through captive legislation dealing with incorporated cell captives and other updates to the statute there. The outcome still remains uncertain but headwinds seem to prevail.
Rounding out our domicile legislative round-up, a captive bill has been introduced in the Tennessee Legislature that was put together by taking the best provisions from captive laws in multiple domiciles. It’s too early to say whether the legislation will pass this year, but if it does Tennessee is sure to attract national attention.
A new era of captive regulatory structures seems to be emerging across the country. Will our industry’s “big thinkers” be up to the challenge on delivering the next generation of innovative ART programs to prove the potential is real?
Thursday, March 3, 2011
Digesting Health Care Reform
So we hurry up and wait.
That is perhaps the most apt description of how self-insured employers and their business partners have adapted to the new health care law and the ongoing reform process it has triggered.
For obvious reasons, we saw a flurry of activity immediately after the passage of PPACA to first determine what was actually in the legislation and then to move forward with compliance planning. This stage seems to have largely passed and now we are in an extended waiting period until 2014, which is when the health insurance exchanges are scheduled to come on-line and the next wave of regulatory requirements, such as the employer mandate, are upon us.
With that timeline framed, let’s take a look at where things stand today and possible legislative/regulatory developments over the next three years.
Clearly there is curiosity with regard to self-insured employer reaction to PPACA as we approach the first anniversary of the law’s enactment. A recent outreach effort to employers of various sizes generated feedback that concluded the law has not created any significant hurdles for them to continue to self-insure, at least in the short run.
The biggest issue seems to be whether or not employers want to retain grandfather status of their health plans. Although unscientific, the feedback suggests it is almost an even split regarding grandfather status decision.
We also received feedback on other issues such administrative burdens, plan design changes, wellness programs and stop-loss cost. When this information was aggregated, the observation is that while there is general discomfort with adapting to the new law, employers are sticking with self-insured health plans, at least for time being.
More on the longer term employer view later, but first we need to stay focused on health care reform developments that will play out in the coming weeks and months, which could influence events before 2014.
Separate HHS and DOL reports dealing with self-insured health plans will likely be released this month and despite efforts to ensure that the regulators are fully educated about self-insurance, there is probably a better than average chance that these reports will contain negative commentary.
Key members of Congress and their staff have already been briefed in advanced about possible biased findings, and we have been generally encouraged by the supportive responses. That said, we could very well see self-insured health plans being one of the focal points in future legislative developments if official government reports conclude that such plans impede overall health reform implementation efforts.
The most likely threat would be legislation to restrict smaller employers from self-insuring, similar to a provision actually included in an early version of the PPACA legislation that SIIA was able to have stripped.
As previously reported, the IRS is also looking to define stop-loss insurance, which was an unanticipated consequence of the health care law. We expect a face-to-face meeting any day to get a better understanding of the agency’s thinking and I will be sure to publish a recap of this meeting, so be sure to check back regularly.
It was interesting to hear President Obama’s comments at the National Governors Association meeting this week that he is agreeable for moving up the timeline for states to be available to apply for waivers to the health care law if they develop their own reform plans that achieve the same access and affordability outcomes as the administration anticipates through PPACA implementation.
This offer was made in response to complaints from numerous governors that the new health care law will greatly increase costs to the states due to expanded Medicaid obligations. And of course, it was classic Obama rhetoric – a politically appealing sound bite that doesn’t square with reality.
Of course, the hitch with this offer is that a state-based plan must meet an artificially high bar for outcomes in order to be approved, so the reality is that it is unlikely that any waivers will actually be granted. As such, it is probably premature to be concerned about ERISA preemption issues, but we will certainly keep an eye on things.
In a bit of positive news, some of our reliable sources in Congress have signaled a renewed interest in association health plan (AHP) legislation, which would include a self-insurance option. They tell us, however, that the one hurdle to overcome is the perception that AHPs would contribute to adverse selection and therefore compromise larger health care reform objectives.
We are working to address these concerns now, so stay tuned for a possible return of AHPs as a serious topic for discussion on Capitol Hill.
Then there are the legal challenges to PPACA. Just today, Florida Federal Judge Robert Vinson put the Obama on notice that they have seven days to file an motion for expedited appellate review of the individual mandate constitutionality question or 26 state will be allowed to hold off on any PPACA implementation actions pending a final ruling by the Supreme Court. This has made things even more interesting.
There will be more short term health care reform legislative/regulatory developments for sure, but I thought it would be useful to highlight those on the radar screen today.
Now let’s return to the longer view of PPACA from the self-insured employer perspective. The real uncertainly arrives in 2014 when companies are required to provide health coverage or pay a penalty (play or pay).
From talking with several employer representatives, we have learned that most companies have been running numbers to test both scenarios, but are generally keeping tight-lipped about any conclusions at this early date. So essentially, the self-insurance marketplace has moved quickly to adapt to the new health care regulatory environment and now the waiting begins for potentially bigger shoes to drop going forward and the resulting reaction from self-insured employer and there business partners.
Settle in…it’s going to be a long ride.
That is perhaps the most apt description of how self-insured employers and their business partners have adapted to the new health care law and the ongoing reform process it has triggered.
For obvious reasons, we saw a flurry of activity immediately after the passage of PPACA to first determine what was actually in the legislation and then to move forward with compliance planning. This stage seems to have largely passed and now we are in an extended waiting period until 2014, which is when the health insurance exchanges are scheduled to come on-line and the next wave of regulatory requirements, such as the employer mandate, are upon us.
With that timeline framed, let’s take a look at where things stand today and possible legislative/regulatory developments over the next three years.
Clearly there is curiosity with regard to self-insured employer reaction to PPACA as we approach the first anniversary of the law’s enactment. A recent outreach effort to employers of various sizes generated feedback that concluded the law has not created any significant hurdles for them to continue to self-insure, at least in the short run.
The biggest issue seems to be whether or not employers want to retain grandfather status of their health plans. Although unscientific, the feedback suggests it is almost an even split regarding grandfather status decision.
We also received feedback on other issues such administrative burdens, plan design changes, wellness programs and stop-loss cost. When this information was aggregated, the observation is that while there is general discomfort with adapting to the new law, employers are sticking with self-insured health plans, at least for time being.
More on the longer term employer view later, but first we need to stay focused on health care reform developments that will play out in the coming weeks and months, which could influence events before 2014.
Separate HHS and DOL reports dealing with self-insured health plans will likely be released this month and despite efforts to ensure that the regulators are fully educated about self-insurance, there is probably a better than average chance that these reports will contain negative commentary.
Key members of Congress and their staff have already been briefed in advanced about possible biased findings, and we have been generally encouraged by the supportive responses. That said, we could very well see self-insured health plans being one of the focal points in future legislative developments if official government reports conclude that such plans impede overall health reform implementation efforts.
The most likely threat would be legislation to restrict smaller employers from self-insuring, similar to a provision actually included in an early version of the PPACA legislation that SIIA was able to have stripped.
As previously reported, the IRS is also looking to define stop-loss insurance, which was an unanticipated consequence of the health care law. We expect a face-to-face meeting any day to get a better understanding of the agency’s thinking and I will be sure to publish a recap of this meeting, so be sure to check back regularly.
It was interesting to hear President Obama’s comments at the National Governors Association meeting this week that he is agreeable for moving up the timeline for states to be available to apply for waivers to the health care law if they develop their own reform plans that achieve the same access and affordability outcomes as the administration anticipates through PPACA implementation.
This offer was made in response to complaints from numerous governors that the new health care law will greatly increase costs to the states due to expanded Medicaid obligations. And of course, it was classic Obama rhetoric – a politically appealing sound bite that doesn’t square with reality.
Of course, the hitch with this offer is that a state-based plan must meet an artificially high bar for outcomes in order to be approved, so the reality is that it is unlikely that any waivers will actually be granted. As such, it is probably premature to be concerned about ERISA preemption issues, but we will certainly keep an eye on things.
In a bit of positive news, some of our reliable sources in Congress have signaled a renewed interest in association health plan (AHP) legislation, which would include a self-insurance option. They tell us, however, that the one hurdle to overcome is the perception that AHPs would contribute to adverse selection and therefore compromise larger health care reform objectives.
We are working to address these concerns now, so stay tuned for a possible return of AHPs as a serious topic for discussion on Capitol Hill.
Then there are the legal challenges to PPACA. Just today, Florida Federal Judge Robert Vinson put the Obama on notice that they have seven days to file an motion for expedited appellate review of the individual mandate constitutionality question or 26 state will be allowed to hold off on any PPACA implementation actions pending a final ruling by the Supreme Court. This has made things even more interesting.
There will be more short term health care reform legislative/regulatory developments for sure, but I thought it would be useful to highlight those on the radar screen today.
Now let’s return to the longer view of PPACA from the self-insured employer perspective. The real uncertainly arrives in 2014 when companies are required to provide health coverage or pay a penalty (play or pay).
From talking with several employer representatives, we have learned that most companies have been running numbers to test both scenarios, but are generally keeping tight-lipped about any conclusions at this early date. So essentially, the self-insurance marketplace has moved quickly to adapt to the new health care regulatory environment and now the waiting begins for potentially bigger shoes to drop going forward and the resulting reaction from self-insured employer and there business partners.
Settle in…it’s going to be a long ride.
Subscribe to:
Posts (Atom)