While this blog took the summer off, we have been keeping
a close eye on the numerous developments related to stop-loss attachment point
regulation. Now that most of these
developments have slowed down, at least for now, some exclusive reporting and
commentary should be useful as those in the self-insurance industry (including
those involved with employee benefit captives) take a collective breath.
Pushed and prodded by a collection of health care reform
advocates, federal regulators invited interested parties to submit written
comments regarding the smaller insured group health plans facilitated by
stop-loss insurance with “low” attachment points.
About 150 comment letters have been submitted to date and
the talking points are largely predictable.
For the critics of self-insurance, the usual canards are
widely repeated. This request for
information (RFI) process signaled a clear focus on self-insurance unlike
anything that has been seen in recent years.
But the path forward remains unclear.
That’s because the Affordable Care Act does not provide
any explicit statutory authority for regulators to promulgate new rules
relating to stop-loss insurance arrangements…yet that may not preclude action
that could achieve the same objective.
The HHS, DOL and/or Treasury Department (tri-agencies)
could potentially rely on their general rule-making authority under ERISA or
the Public Health Services Act, to play with definitions or to engage in other
revisionist rule-making mischief. The most likely scenario is that a new
definition of a self-insured group health plan is crafted based on risk
retention/risk transfer arrangements – thereby allowing the feds to indirectly
regulate stop-loss insurance.
So how serious is this potential threat? The
answer is complicated.
In a private meeting with self-insurance industry
representatives over the summer, a senior DOL official downplayed the prospects
that any action is imminent or even likely, explaining that they felt the RFI
was necessary for the agencies to get a better understanding of how the
self-insurance marketplace operates in the real world.
But conspicuously absent from the meeting, despite
previously confirming their attendance, were senior HHS officials involved with
the stop-loss RFI process. This was
notable because it is believed that HHS has the most aggressive regulatory
agenda when it comes to self-insurance.
The Treasury Department was represented at the meeting but that agency
has remained guarded about its interest and intent.
Any of the three agencies could initiate a rule-making
process, but it is less likely if there is not a consensus among the three.
So with that in mind, industry lobbyists have been making
the rounds to congressional oversight committees to encourage that they become
engaged on this issue and request that the agencies stand down now that the RFI
process has been concluded and there is no “smoking gun” which would justify
new regulatory action.
The most substantive meeting took place just a few weeks
ago with the senior policy advisors for the Senate Finance Committee. Given that the committee is chaired by
Democratic Senator Max Baucus, who has been supportive of self-insurance in the
past, it is best positioned to intervene.
The biggest push back by committee staffers was centered on
the fact that the ACA does not require that self-insured employers cover
essential health benefits (EHBs). They
argued that because of this “loophole” there is incentive for smaller employers
to self-insurer, facilitated by stop-loss insurance with low attachment points,
in order to be able to offer skimpy health care coverage as a way to save
money.
Industry experts at the meeting, including executives
from two leading TPAs, explained why this fear is unfounded for practical
reasons. It was then pointed out that
while self-insured employers are not required to cover EHBs, they will be
subject to “minimum value” requirements, which essentially accomplish the same
public policy objective.
But a final argument seemed to box in the Senate
staffers. Even if you concede the EHB
“loophole” (which this blog does not), the fact is that the law was drafted in
a very deliberate way to distinguish self-insured group health plans from
health insurance carriers. In this
regard, any proposed changes should come back to Congress in the form of
legislation as opposed to letting unelected regulators arbitrate substantive
policy issues.
The discussion was concluded with a formal request that Chairman
Baucus consider exercising the committee’s oversight authority and communicate
to the Treasury Department accordingly.
We understand that the request is still under consideration, so be sure
to check back with this blog for updates.
Of course, the focus on self-insured plans with stop-loss
insurance extends beyond Washington, DC.
Many of our friends at the National Association of
Insurance Commissioners (NAIC), have been led by the nose over the past year by
health care reform advocates to take action on making it more difficult for
smaller employers to self-insurer through tighter stop-loss attachment point
regulation.
At the NAIC summer meeting held a few weeks ago in
Atlanta, the ERISA (B) Working Group considered a proposal to endorse
“guideline amendments” to the current stop-loss insurance model act related to
attachment point requirements.
Clearly aware of the blowback that would be directed at
the NAIC if it took aggressive action that was seen to be disruptive to the
health care marketplace, Working Group Chair Christina Goe of Montana tried to
diffuse concerns by explaining the proposal is only advisory in nature and that
the NAIC does not intend to formally amend the model act for a variety of
procedural reasons. And for good
measure, committee members made it clear that they did not overstep their
charge and attempt to redefine stop-loss insurance as health insurance.
Well, it is certainly nice to hear this self-awareness of
the limitations to their “charge,” but multiple federal court rulings have
already confirmed that stop-loss insurance cannot be defined as health
insurance, so no real favor here.
And as far as considering a guideline amendment versus an
amended model act, it’s a distinction without a meaningful difference.
Of the 26 states that currently regulate stop-loss
attachment points, only a few have adopted the model act without
variation. So it is unlikely that an
amended model act would take root across the country any time soon. No matter, as a simple NAIC recommendation
on how states should regulate stop-loss attachment points could accomplish the
same objective (restricting the ability of smaller employers to self-insure)
much quicker.
That is because individual insurance commissioners who
are already inclined to push stop-loss legislation in their states will use the
NAIC recommendation as justification for action. Given the technical nature of this issue, it’s
easy to understand how this would be enough to persuade most state legislators
to go along without asking too many questions.
The NAIC working group deferred action on the proposal
until its winter meeting, which in hindsight was predictable because insurance
commissioners, like all political creatures, normally put off major policy
decisions when Election Day looms. Let
the dust settle after November 6 and get ready for more action.
This brings us to California.
As this blog has previously reported, the state’s
insurance commissioner, Dave Jones, is a political creature who is interested
in beefing up his credentials within the Democratic Party. So it should not be surprising that he has
come out as a major proponent of health care reform, and more specifically the
establishment of California’s health insurance exchange, which is expected to
come online in 2014.
Self-insurance therefore became a target for political
reasons every bit as much as for misinformed policy reasons in order for
Commissioner Jones and his allies in the Legislature to claim credit for
protecting the viability of the state’s health insurance marketplace as the
exchange begins to be implemented. A
nice populist message for sure.
One health care broker in California perhaps summed it up
best when he referred to SB 1431 as the “California Health Insurance Exchange
Protection Act of 2012.”
Now that it has been confirmed that SB 1431 has been
shelved, at least until a special session this December, we can look at the
past as prologue.
The same stale arguments are certain to be dredged back
up when some version of SB 1431 is brought back for consideration after the
November elections, and the political posturing will be predictably crass.
Equally unfortunate is that many stakeholders who will
oppose SB 1431 “2.0” will likely concede the central principle once again of
whether stop-loss attachment points should be regulated at all and immediately
begin negotiating the numbers and formula.
Yes, political realities often dictate short term lobbying strategies
based on compromise, but the longer view should not be ignored in this case.
It’s been a long hot summer for stop-loss insurance
indeed, which has ended without much certainty for the future of the
self-insurance marketplace. We will see whether the coming autumn chill cools
off the debate or if partisan health care reform advocates continue to overplay
their hand.
