Lucky Mary Loves Her Black Market ICHRA
Transferring high risk plan members by way of an insurance policy is nothing new. Self-funded health plans routinely purchase stop loss insurance for that purpose. Others have found another method made possible by the Affordable Care Act (ACA). We call it ACA Re, the best tax supported stop loss policy scheme ever designed by Congress.
ACA Re is a strategy used to transfer high risk plan members to guarantee issue individual policies affording immediate coverage for all pre-existing conditions. The employer or third-party vendor facilitates the risk transfer process and covers the premium and eligible out-of-pocket expenses on behalf of former plan members who qualify.
Luck Mary is a good example of how ACA Re works. She was diagnosed with cancer. Large case management predicted her medical expenses would exceed $100,000 for the year. Poor Mary’s out-of-pocked expenses were projected to be +$15,000 (deductible, co-insurance, copays), money she didn’t have. Her employer’s stop loss insurance wouldn’t kick in until her claims reached $150,000.
Lucky Mary’s employer had the foresight to include a special benefit for situations just like this. She voluntarily applied and was accepted for membership in an individual health insurance plan of her choosing at no cost to her. Her eligible out-of-pocket expenses were covered in full in addition to the monthly premiums all of which was expected to total $35,000. Lucky Mary ended up with better coverage in her time of greatest need and her employer traded a +$100,000 bullet for a $35,000 investment.
(Lucky Mary is a cancer survivor thanks to the best coverage insurance can buy and the quality care she was able to receive. She is back to work and has rejoined her company health plan.)
ACA Re is used more often than you think. Some employers manage the risk transfer process internally while others engage third party intermediaries to do the work for them.
An example of the later is the Samaritan Fund Program. “The fund is a 501(c)(3) charitable organization that partners with employers to assist ailing employees and help employers keep their health insurance claim costs down. The employers pay a $55k fee per approved employee and the rest is covered by charitable donations.”
Marquette University uses the Samaritan Fund Program as a means to transfer high risk members off the university’s health plan while providing members better benefits in their time of greatest medical needs. “Representatives at the Samaritan Fund help find medical plans that offer the most coverage for the lowest price for qualified members facing a difficult illness and as a replacement for the plans offered through Marquette University. Direct any questions on this program to the Samaritan Fund Program team via phone at (866) 764-9290 or via email HERE“
Brett Morris from Samaritan Fund Program explains how the program works in a three minute video HERE.
Here’s how we think the plan is structured (We reached out to the Samaritan fund in the past but have had no luck in getting a response).
(The figure in the lower right-hand side is Don Pedro)
1 PLAN SPONSOR GIFTS $50,000 TO NON-PROFIT CHARITABLE FOUNDATION
2 FOUNDATION ASSISTS PLAN MEMBER TO APPLY FOR AN INDIVIDUAL HEALTH INSURANCE POLICY
3 INDIVIDUAL POLICY ISSUED – ALL PRE-EXISTING CONDITIONS COVERED
4 DEBIT CARD ISSUED TO MEMBER FULLY LOADED TO COVER COST OF INDIVIDUAL POLICY AND ELIGIBLE OUT-OF-POCKET EXPENSES (DEDUCTIBLE, COPAYS, COINSURANCE)
There are more third-party vendors active in this space. We know of a TPA who has been helping employers for over a decade in facilitating risk transfer to the individual market. Their niche is public business including counties and school districts. Their client testimonials are compelling.
Plan document language is an important element that can’t be overlooked. Certain language governs the process and defines eligibility.
There is a bit of controversy surrounding ACA Re. Some call it unethical patient dumping. Others call it a Black Market ICHRA. One lawyer offers caution while another says there is nothing wrong with the scheme pointing to federal non-discrimination statutes as his basis. Still another opines “Awesome! I would do it as long as the plan sponsor agrees with it!”
Ask two lawyers for an opinion and you will get three, then pick the one you like and go with it.
The ultimate question is “Would you invest $35,000 – $50,000 to transfer a +$100,000 risk while giving the plan member better coverage? Don Pedro swears you won’t go to jail if you do. – “You can take it to the bank. Trust me, I’m never wrong.“
Seems to me middle class working Americans are funding ACA Re through payroll tax deductions so why not take advantage of that? And besides, ACA Re is structured to mitigate adverse risk through pooling. The ACA Re risk pool is the largest risk pool on the planet and it’s largely taxpayer monies supporting it.
According to the American Academy of Actuaries “The Affordable Care Act (ACA) requires that insurers use a single risk pool when developing premiums. The single risk pool incudes all ACA-compliant plans inside and outside of the marketplace/exchange within a state. In other words, insurers must pool all of their individual market enrollees together when setting the prices for their products. This means that the costs of the unhealthy enrollees are spread across all enrollees.”
More and more employers like ACA Re so much they are placing all of their risk, good and bad, through an ACA Re approved program called ICHRA (I Can’t Handle Risk Anymore).
ADDITIONAL READING:
ACA RE – The Best Stop Loss Policy Ever?
High Cost Claim Diversion Strategy Saves Plan Sponsors Big Bucks
Employers See Tremendous Savings As High Dollar Claims Leave Their Plan
