Could We Have This Debate Before It Is Too Late?
Is the use of fully insured group health insurance products as stop-loss coverage for group health plans going to remain a viable solution?
The obvious question that follows is: Are State Departments of Insurance Compelled by the Affordable Care Act (ACA) To Limit Fully Insured Health Products to Minimum Essential Benefits?
Short answer is a resounding No. This is an intriguing question which is being hashed out across our land and I am sad to say that most DOIs are getting it wrong. Section 1301, Paragraph (b), 1, A, the ACA is very clear in its definition of a health plan:
1) Health Plans—
(A) In General.—the term ‘‘health plan’’ means health insurance coverage and a group health plan.
Did that come through? “And a group health plan”.
One of the things that came out of the ACA, which I only hear complaining about, is the Medical Loss Ratio (MLR) mandate; 80% of small group (99 and under) and 85% of large group premium dollars must go to fund patient care. This puts fully insured products in the strange position of being underpriced as a stop-loss product.
Fully insured as a stop-loss is underpriced for a couple reasons.
1. Traditional stop-loss runs at a Medical Loss Ratio somewhere around 60%. The difference of 20% - 25% should jump off the page when you think about this.
2. The risk. Specific deductibles of $20K - $50K or more turn into standard deductibles of $5 - $25K. The biggest thing about this is that we are working with “standard” deductibles which limit deductible count to one or two per family and I am not speaking of aggregate v. embedded, I am truly speaking of one or two deductibles per family.
Just when this is dawning on the market and employers are finding ways to offer truly affordable benefits to their people, some state departments of insurance have disallowed High Deductible Health Plan (HDHPs) from existing legally in their state. Instead they might consider requiring health plans to comply with the ACA and keep offerings as diverse as possible to allow the market to function and keep prices down.
Let’s do a quick mental exercise to illustrate my point. Track with me on premium costs for a moment: Premiums rise exponentially as deductibles go down. If the desired effects are lower costs, then it makes sense to raise my deductible… But what if I raise only MY deductible and leave my employees with the same rich benefits that are currently in place? This lowers costs while staying within the bounds of the ACA because I am doing it all under a “group health plan.” Add to this logic some actuarial data: If 25%-35% of premium costs are associated with Rx copays and 20%-30% of premium costs are attributable to office visit copays, then I can lower premium costs by 45%-65% merely by removing them from the insurance and putting them back in as a “plan” item. My employee enjoys the same benefit and I get to keep what is not spent. This is as much of a win-win as the market has seen for some time.
This powerful strategy brought to the market by companies like Benefit Plus Plan works and will be much more difficult to implement when HDHPs are taken away.
This brings us back to the point of this article; the question: is the use of fully insured group health insurance products as stop-loss coverage for group health plans going to remain a viable solution?
Could we have a debate on this before it is too late?
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.