Tip­ping point

Small busi­ness self-in­sur­ance push threat­ens re­form

Modern Healthcare - - THE WEEK IN HEALTHCARE - Jonathan Block

Nashville-based health ben­e­fits con­sul­tant Austin Madi­son says he’s sur­prised that many of his small-busi­ness clients are ask­ing him about a type of health plan that his­tor­i­cally has ap­pealed only to larger em­ploy­ers.

Self-in­sured health ben­e­fit plans—in which the com­pany pays di­rectly for its em­ploy­ees’ health­care ex­penses and buys stop-loss in­sur­ance to pro­tect against cat­a­strophic costs— have been pop­u­lar for em­ploy­ers with more than 500 em­ploy­ees for a long time.

But some ex­perts say pro­vi­sions of the Pa­tient Pro­tec­tion and Af­ford­able Care Act that go into ef­fect in 2014 could pro­vide a tip­ping point to­ward self-in­sur­ance among smaller groups. The ap­peal of self-in­sur­ance is that such plans will be ex­empt from many key ACA pro­vi­sions, such as pro­vid­ing an es­sen­tial health ben­e­fits pack­age and pay­ing the health in­sur­ance tax. Busi­ness groups say ACA re­quire­ments could hike pre­mi­ums for small-group cov­er­age.

Madi­son, a vice pres­i­dent at the Crichton Group in Nashville, pre­dicted the per­cent­age of com­pa­nies with be­tween 150 and 300 em­ploy­ees that go self-in­sured will rise. “Six years ago, un­less you had 600 em­ploy­ees or more, I would say you would need to wait to get big­ger” be­fore con­sid­er­ing self-in­sur­ance, Madi­son said. But now, he added, “I am see­ing em­ploy­ers down to 150 em­ploy­ees want to self­in­sure,” and he has heard anec­do­tal ev­i­dence of third-party ad­min­is­tra­tors of­fer­ing self-in­sur­ance cov­er­age to groups as small as 25.

In ad­di­tion, com­mer­cial health in­sur­ers in­creas­ingly are tar­get­ing small busi­nesses for sales of self-fund­ing ad­min­is­tra­tive ser­vices and stop-loss poli­cies. Unit­edHealth Group is of­fer­ing self-fund­ing ser­vices to busi­nesses as small as 10 em­ploy­ees, spokes­woman Cheryl Ran­dolph said.

The po­ten­tial for more small busi­nesses to self-in­sure is a ma­jor con­cern for ACA sup­port­ers and state in­sur­ance ex­change of­fi­cials. They worry that hav­ing more small em­ploy­ers with younger, health­ier work­ers opt out of the ACA- reg­u­lated in­sur­ance pool could mean a sicker risk pool and higher pre­mi­ums for in­sured prod­ucts. It also could re­duce par­tic­i­pa­tion in state Small Busi­ness Health Op­tions Pro­gram ex­changes, the new mar­ket­places for small em­ploy­ers, whose suc­cess re­mains un­cer­tain.

A Kaiser Fam­ily Foun­da­tion sur­vey re­cently found that 15% of small em­ploy­ers with fewer than 200 em­ploy­ees cur­rently are self-in­sured. In con­trast, in 2011, 58.5% of work­ers who re­ceived cov­er­age through an em­ployer with 1,000 or more em­ploy­ees were in self-in­sured plans, ac­cord­ing to the Em­ployee Ben­e­fit Re­search In­sti­tute, up from 40.9% in 1998. The study also found that only 12% of com­pa­nies with fewer than 50 em­ploy­ees were self-in­sured, a fig­ure that has re­mained steady for years.

If a small busi­ness has a rel­a­tively healthy work­force, it makes sense for the firm to con­sider self-in­sur­ance since such cov­er­age is ex­empt from ACA pro­vi­sions such as the health in­sur­ance tax and es­sen­tial health ben­e­fits re­quire­ment, which will sig­nif­i­cantly add to pre­mium costs in 2014, said Lev Gins­burg, di­rec­tor of govern­ment af­fairs for the Busi­ness Coun­cil of New York State.

For ex­am­ple, CareFirst Blue Cross and Blue Shield, the largest in­surer in Mary­land, says its small-group rates will rise 15% next year. Higher small-group rates are par­tic­u­larly a con­cern in states such as Mas­sachusetts that have de­cided to merge their in­di­vid­ual and small-group mar­kets in their state in­sur­ance ex­change, which could drive costs for small-group cov­er­age even higher.

Steve Wo­j­cik, vice pres­i­dent of pub­lic pol­icy at the National Busi­ness Group on Health, said in­sur­ers and em­ployee ben­e­fits firms have been ap­proach­ing some of his or­ga­ni­za­tion’s mem­bers about mov­ing to self-in­sur­ance, though the ex­pe­ri­ence of firms and in­sur­ers ag­gres­sively mar­ket­ing self-in­sur­ance is mixed.

The ACA re­quires com­pa­nies with more than 50 full-time em­ploy­ees to ei­ther pro­vide cov­er­age or pay a penalty. The cur­rent top busi­ness con­cern of ev­ery com­pany with 51 to 100 em­ploy­ees is how they will com­ply with the ACA, said Roger Hays, pres­i­dent and CEO of Pre­mier Em­ployer Ser­vices in Cen­ten­nial, Colo., a sub­urb of Den­ver. Hays’ firm as­sists small and mid-size busi­nesses with ben­e­fits ad­min­is­tra­tion and other sup­port.

“Most em­ploy­ers want to do the right thing,” Hays said. “How­ever, they just don’t know if they can af­ford to do the right thing and keep their doors open.” If an em­ployer with 51 or more em­ploy­ees doesn’t pro­vide health cov­er­age, they face a fine of $3,000 per em­ployee, who would then get cov­er­age through a state ex­change.

“Th­ese small em­ploy­ers are spooked and wor­ried and try­ing to pre­serve their ben­e­fit plans,” said Robert Laszewski, a for­mer in­sur­ance ex­ec­u­tive and pres­i­dent of Health Pol­icy and Strat­egy As­so­ciates, a con­sult­ing firm.

The real pos­si­bil­ity of more small groups self-in­sur­ing worries some ex­perts. “A dras­tic move to self-in­sur­ance could re­move a

large num­ber of healthy peo­ple from the SHOP ex­change risk pools, lead­ing to higher pre­mi­ums for those who get cov­er­age through those ex­changes,” said Linda Blum­berg, a se­nior fel­low in the Ur­ban In­sti­tute’s Health Pol­icy Cen­ter.

A re­cent Ur­ban In­sti­tute study Blum­berg co-au­thored look­ing at the cost im­pact of more small busi­nesses mov­ing to self-in­sur­ance found that with­out laws reg­u­lat­ing sto­ploss in­sur­ance, pre­mi­ums in the small-group mar­ket could in­crease by 24.8% for in­di­vid­ual plans and 19.1% for fam­i­lies in the small­group mar­ket.

Busi­ness groups ac­knowl­edge the po­ten­tial neg­a­tive im­pact of more self-in­sur­ance on the ACA re­form struc­ture. It could drive up pre­mi­ums in the in­sured pool, Gins­burg said. “That leaves the pool of peo­ple left to ab­sorb the health in­sur­ance tax much smaller, and brings the amount (of the health in­sur­ance tax) per per­son up even more, fur­ther bur­den­ing the small busi­nesses that pur­chase in­sur­ance,” he said.

Even some sup­port­ers of self-in­sur­ance ques­tion whether it’s a fi­nan­cially smart idea for smaller com­pa­nies with fewer than 250 em­ploy­ees to self-in­sure, given the tiny size of their risk pool and po­ten­tial for a few high-cost cases to swamp their ben­e­fit plan.

Some states make it harder for small busi­nesses to self-in­sure by reg­u­lat­ing stop-loss in­sur­ance poli­cies, said Hays, who noted that Colorado re­cently passed a law ham­per­ing the abil­ity of busi­nesses to self-in­sure.

That law makes stop-loss in­sur­ance to self­funded em­ploy­ers less ap­peal­ing by low­er­ing the de­ductible level at which stop-loss in­sur­ance takes ef­fect, thus driv­ing the cost of the cov­er­age higher.

Twenty-four states reg­u­late stop-loss in­sur­ance. Some have es­tab­lished re­quired min­i­mum cov­er­age lev­els, which are de­signed to pro­tect em­ploy­ers against costs they can’t af­ford.

Nev­er­the­less, com­mer­cial in­sur­ers are mov­ing into the self-in­sur­ance busi­ness. Cigna Corp. of­fers self-in­sur­ance ad­min­is­tra­tive ser­vices and stop-loss poli­cies to smaller busi­nesses, in­clud­ing com­pa­nies with fewer than 250 em­ploy­ees.

Julie McCarter, vice pres­i­dent of prod­uct for the Cigna’s Se­lect Seg­ment, said selfin­surance gives em­ploy­ers more flex­i­bil­ity to de­sign a plan that bet­ter suits their work­force. In ad­di­tion, self-in­sured em­ploy­ers have more di­rect ac­cess to data on how em­ploy­ees use their ben­e­fits. And self­funded plans give em­ploy­ers a stronger fi­nan­cial in­cen­tive to pro­mote em­ployee well­ness pro­grams.

In April, Aetna un­veiled a new self-funded prod­uct for com­pa­nies with 100 and 500 em­ploy­ees known as Aetna Fund­ing Ad­van­tage. Unit­edHealth Group has dropped its min­i­mum size for self-in­sur­ance prod­ucts from 100-em­ployee firms to 10, spokes­woman Ran­dolph said.

One ex­pert who didn’t want to be named said com­mer­cial in­sur­ers may be em­pha­siz­ing self-in­sur­ance to re­duce their in­sured risk as they brace for mil­lions of newly in­sured cus­tomers un­der the ACA, whose med­i­cal uti­liza­tion will be hard to pre­dict. Other ob­servers say in­sur­ers like self-in­sur­ance be­cause it largely op­er­ates out­side the re­stric­tions of the re­form law and gives them greater lee­way to seek out health­ier groups.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.