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Insurers promoting phony "self-insured" plans for small employers

California seeks limits on small-business self-insurance trend

By Chad Terhune
Los Angeles Times, March 23, 2012

Self-insurance, in which employers pay medical providers for their workers' care, has traditionally been used only by large employers that have the financial resources to pay for expensive medical claims.

Now some insurers are chasing after much smaller customers with new plans designed to limit employer payouts for big claims using what's called stop-loss policies. This guarantees that businesses won't be responsible for anything over a certain amount per employee, perhaps as low as $10,000 or $20,000, with the rest paid by an insurer. Regulators and health-policy experts say this arrangement undercuts the notion of self-insurance since employers aren't bearing much of the risk, and it allows companies to circumvent some state insurance rules.

"This is not real self-insurance. This is clearly a sham," said Mark Hall, a professor of law and public health at Wake Forest University who has studied the small-business insurance market.

Critics said insurers such as Cigna Corp. are using these new plans to game the system and cherry-pick companies with healthier workers. They said this could undermine a key goal of the federal Affordable Care Act to lower premiums by pooling together more healthy and sick Americans into insurance exchanges. Premiums could continue to escalate without a diverse pool of consumers.

Insurance officials say that they are responding to employer demands for more affordable coverage and that regulators shouldn't interfere in the market.

Self-insurance is attractive for many reasons, particularly the prospect of lower costs. It's exempt from state insurance regulations such as mandated benefits, granting employers the flexibility to design their own benefit package and the opportunity to reap some of the savings from employee wellness programs. A federal law, the Employee Retirement Income Security Act, or ERISA, governs self-funded plans. Some aspects of the Affordable Care Act do apply to self-insurance, such as the elimination of caps on lifetime benefits and some preventive care at no cost.

Anthem Blue Cross, California's largest for-profit insurer and a unit of WellPoint Inc., began selling these self-insured plans to employers with as few as 35 workers March 1, down from its previous minimum of 250 employees. Assurant Inc., a New York-based insurer, is selling plans to companies in California and other states with as few as 10 workers.

Marc Neely, vice president for Cigna's self-insured business in 14 Western states, said his sales to small businesses with as few as 25 people are growing at a double-digit rate because employers are fed up with annual rate hikes of 10% to 15% on their traditional plans. Neely said Cigna offers stop-loss coverage as low as $20,000 per employee. "We're excited about California as a growth market for us," Neely said.

http://www.latimes.com/business/la-fi-small-business-insure-20120323,0,4...

Comment:

By Don McCanne, MD

Now that the Affordable Care Act (ACA) is law, we can be assured the the private insurers will be team players in helping to craft regulated insurance markets that will serve the interests of patients first. Right? Wrong! Just read this article about how they are dumping much of the risk onto employers through these phony "self-insured" plans, while using ERISA to escape some of the regulatory provisions of ACA.

These crooks will never change. It is in their corporate DNA. No matter how much they are regulated, they will always find a way around to cheat the payers and avoid paying for the sick. This is what insurance market innovation is all about - screw the patients and take the money and run.

(For more, this topic was covered in a previous message: http://www.pnhp.org/news/2011/november/exemptions-for-self-insured-plans...)