Association Health Plans

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The rising cost of health insurance remains a major problem for small business owners. In 2015, 25 percent fewer small businesses offered health insurance than when the Affordable Care Act (ACA) passed in 2010, a significant drop in small business coverage.

SIIA’s 2017 Legislative Conference Walk-on-the-Hill Preparation Fact Sheet on Legislative Priorities

Source: Ernie Clevenger’s weekly news letter – The Self-Insurance Institute of America, Inc. (SIIA), 4/24/2017, www.SIIA.org
Background

Thousands of self-insured health plans across the country rely on stop-loss coverage to protect in cases of catastrophic health care claims.

  • A study by the nonpartisan Employee Benefit Research Institute found that nearly 60 percent of private-sector workers with health coverage were in self-insured plans in 2011.
  • Stop-loss insurance is purchased by most self-insured organizations (employers, Taft-Hartley plans and public sector entities) to provide a financial backstop guarding against catastrophic health care claims.
    • Unlike health insurance, stop-loss insurance does not cover individuals, nor does stop-loss insurance pay health care providers.
  • Employers are increasingly choosing to self-insure, in part because doing so helps them control costs better.

Association Health Plans (AHPs) – Need for Self-Insured Title

Background

  • The rising cost of health insurance remains a major problem for small business owners. In 2015, 25 percent fewer small businesses offered health insurance than when the Affordable Care Act (ACA) passed in 2010, a significant drop in small business coverage.
    • As health insurance costs continue to increase, fewer employers and working families can afford coverage.
  • To combat this, Association Health Plans (‘AHPs”) would allow small business owners, including individuals who are self-employed, to pool together through their membership in a trade or professional association and purchase health coverage for their employees and dependents.
    • Inhibiting the current growth of AHPs is that they currently must meet 50 sets of state regulations and, generally, can only enroll association members domiciled within their state.
  • Since 1996, SIIA and other organizations have pushed additional AHP enabling legislation to boost the ability of member based associations to undertake self-funded AHPs
  • AHPs provide additional choices for small and medium sized employers in the health insurance marketplace by reducing premiums and increasing affordability.
    • A large portion of the cost effectiveness for smaller employers through AHPs is the reduction in administrative costs and increased negotiating power (e.g., due to economies of scale).

H.R. 1101 – Small Business Health Fairness Act recently passed the House and our hope is that the Senate will move forward with similar legislation.

  • We strongly urge the Senate to include self-insurance as an option, which current drafts do not include.
  • Self-insured AHPs will help lower the cost of health insurance by allowing small business owners the same opportunities that larger businesses now experience.
  • AHPs will allow small business owners to band together across state lines through their membership in a bona fide trade or professional association to purchase health coverage.
  • Establishing health insurance benefits through associations will make coverage more affordable by spreading risk among a much larger group, strengthening negotiating power with plans and providers, and reducing administrative costs.

Self-Insurance Protection Act (SIPA) – HR 1304~Senate TBD

  • The Self-Insurance Protection Act would clarify existing law to ensure that federal regulators cannot redefine stop-loess insurance as traditional health insurance. It would also:
    • Preclude any harmful regulatory action seeking to define self-insurance as “health insurance coverage”, which would limit access to stop-loss coverage,
    • Ensure groups seeking to self-insure are able to access the necessary tools.
  • The legislation does not amend the Affordable Care Act (ACA).
    •  Self-insured group health plans are subject to almost all of the ACA market reforms, regardless of whether stop-loss insurance is utilized or not. Self-insured plans are also already regulated under ERISA and the Tax Code.
  • Many self-insured employers that rely on stop-loss insurance could be forced to discontinue their health plans if the bill doesn’t win approval. Unlike health insurance, stop-loss insurance does not cover individuals, nor does stop-loss insurance pay health care providers.
  • Employers of all sizes should be able to continue offering their employees self-insured health plans. It’s unfair – and unnecessary – to change the rules on employers in this way.
  • The Self-Insurance Protection Act (HR 1304) was recently passed by the House by a bipartisan vote of 400-14, but now we need your help…
    •  HOUSE: to continue to support self-insurance with your constituents and on the Hill.
    •  SENATE: to co-sponsor the bill being drafted by Sen. Cassidy and support consideration.
Self-Insurance Protection Act (SIPA) H.R. 1304 – Fact Sheet
SIPA amends the definition of “health insurance coverage” under the Public Health Services Act (PHSA), and parallel sections of ERISA and the Tax Code, to clarify that stop-loss insurance is not health insurance. The legislation does not amend the Affordable Care Act (ACA). SIPA was passed by the full  House on April 5th by a vote of 400-16.Why is SlPA Needed?

in the past, regulators have signaled interest in pursuing a federal rule-making process that would restrict the availability of stop-loss insurance. Specifically, it is believed that the Federal Departments could potentially interpret the definition of “health insurance coverage” to include stop-loss insurance with a specified “attachment point.”

What is Stop-Loss Insurance?

Stop-loss insurance is purchased by most self-insured organizations (employers, Taft-Hartley plans and public sector entities) to provide a financial backstop guarding against catastrophic health care claims. It is a reimbursement mechanism between the carrier and the self-insured organization for claims exceeding pre-determined levels, known as “attachments points.” Unlike health insurance, stop-loss insurance does not cover individuals, nor does stop-loss insurance pay health care providers.

Why is Stop-Loss a Critical Component of Health Plans?

The requirements of the Affordable Care Act have challenged many organizations with self-funded health care plans. For , many plans, the removal of annual claims limits and lifetime coverage maximums have led plans to purchase stop-loss coverage to protect their plans from large scale claims and ensure financial reserves. If stop-loss is defined as health insurance coverage, it will dramatically change the nature of stop-loss coverage, potentially leading to few or no carriers in the market, which  will drive up the cost and threaten the existence of self-insured plans.

Recently, this situation occurred in New Mexico when, for a short period, the State defined stop-loss insurance as health insurance, resulting in stop-loss carriers discontinuing the sale of stop-loss until the ruling was rescinded. Without the availability of stop-loss, self-insured plans would be forced to move back to a more expensive fully-insured model.

Why Are Some Policy-Makers Concerned About Self-Insured Plans?

Some policy-makers at the state and federal level believe that employers are establishing self-insured group health plans for the primary purpose of bypassing certain ACA market reforms. These policy-makers further argue that this trend toward self-insurance, especially in the small and mid-sized employer market segments, will compromise the viability of the ACA Exchanges (in particular, the SHOP Exchanges) because self-insured plans will cover healthy populations, leaving “bad” health risks for the Exchanges. There is no data to substantiate these arguments, and efforts to make it more difficult for employers to self-insure by restricting the availability of stop-loss insurance restricts choice and could lead to more employers discontinuing coverage.

Are Self-Insured Plans Regulated by the ACA?

Non-grandfathered self-insured group health plans are subject to almost all of the ACA market reforms, regardless of whether stop-loss insurance is utilized or not. Self-insured plans are also regulated under ERISA and the Tax Code, making it important to emphasize that self-insurance does not constitute a regulatory loophole.

About SIIA

The Self-Insurance Institute of America, Inc. (SIIA) is a dynamic, member-based association dedicated to protecting and promoting the business interests of companies involved in the self-insurance/alternative risk transfer (ART) industry, both domestically and internationally.  Contact SIIA Vice President of Government Relations Ryan Work at (202) 463-8161 or rwork@siia.org and visit www.SIIA.org.

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