SIIA Stop-Loss Legislation Becomes Law in New York State

The article below was published on October 24, 2017 by Self-Insurance Institute of America, Inc., written by Wrenne Bartlett.

dg-news-article-nyThe Self-Insurance Institute of America, Inc. (SIIA) is pleased to announce that Governor Andrew Cuomo has signed A.8264 into law, allowing grandfathered stop-loss contracts for groups of 51-100 to renew until January 1, 2019.

As background, in late 2015 and early 2016, the New York legislature passed and the governor signed three laws allowing existing stop-loss contracts of 51-100 to be renewed for a period of up to three years. Without these changes, New York State law would have prohibited stop-loss contacts to be issued to any employer classified as a “small employer,” which increased to 100 employees on January 1, 2016.

As part of the series of laws, the New York State Department of Financial Services has contracted with an independent consulting firm to study the employer use of stop-loss in the state and will be issuing a report in March 2018. In speaking to legislators and regulators, it was clear that they wanted to see the report before re-opening the 51-100 stop-loss market. To protect plan sponsors with grandfathered stop-loss policies, we suggested that the legislature extended grandfathering protection for an additional year and allow stakeholders to review the comprehensive report.

SIIA is confident that the report will conclude that smaller employers need continued access to stop-loss insurance as the most cost effective way to provide high-quality self-insured health care benefits. While the report remains ongoing, SIIA continues to press the legislature to pass a permanent fix for smaller employer stop-loss access in 2018.

If you have any questions, please contact Adam Brackemyre, vice president of state government relations at abrackemyre@siia.org or (202) 595-0641.

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Legislators forsake $60M in savings by rejecting self-insurance

The article below was published on August 19, 2017 by Green Bay Press-Gazette, written by Mike Ferguson.

Wisconsin lawmakers are at an impasse over the state budget. Senate leaders can’t agree with their Assembly counterparts on how to fund road repairs, schools, and various agencies.

Resolving this dispute would be easier if lawmakers hadn’t rejected a reform of the state’s costly health insurance program. Switching state employees and their families to a “self-insured” plan could have freed up tens of millions of dollars.

Under such a plan, the state would have covered employees’ medical expenses directly, instead of paying a traditional health insurer and hoping premiums don’t increase. Cutting out the insurance company middleman could have saved millions and enabled Wisconsin to offer higher quality benefits to government workers. It’s a missed opportunity — one that lawmakers should reconsider next year.

The purpose of health insurance is to minimize financial risk. Individuals’ health spending can fluctuate from one year to the next. That’s why people pay premiums to insurers to protect themselves against costly, unpredictable events.

Organizations with hundreds of thousands of employees like the state of Wisconsin don’t experience such fluctuations. They have a steady mix of young and old workers, and healthy and sick ones, making expenses for the entire organization predictable.

The risk of a spike in expenses is virtually nonexistent. So it makes sense for employers like Wisconsin — which offers health coverage to 250,000 government workers and family members — to pay for care directly rather than fork over premiums to traditional insurers.

Budget analysts predicted that self-insuring would save Wisconsin at least $60 million over two years, according to the Wisconsin Group Insurance Board. Private research firm Segal Consulting found that switching to a self-insured plan would save the government $42 million annually.

Despite these projections, Wisconsin’s politicians rejected self-insurance. Instead, the state will continue buying traditional premiums from 17 local insurance carriers.

Some legislators worried that shifting state employees onto a self-insurance plan would deprive traditional insurers of business and force them to raise premiums on other large organizations.

That’s akin to arguing that taxpayers should continue wasting millions of dollars on inflated premiums to subsidize coverage for other large organizations.

Others argued that a switch to a self-insured plan is risky, given the uncertainty surrounding Congress’s attempts to repeal the Affordable Care Act.

But this uncertainty is actually an excellent reason to switch. Self-insured organizations don’t have to worry about premiums swinging wildly or facing a raft of new compliance burdens. Self-insurance is governed by a 40-year-old federal law that will be largely unaffected no matter what happens in Washington.

Instead of addressing the rising health care costs that drive up premiums, Wisconsin lawmakers have decided to shift those costs onto workers in the form of higher deductibles. They’re also raiding the state’s rainy day fund to help pay the coming year’s premiums. This isn’t a strategy for cutting costs.

Twenty-nine states already self-insure their employees’ coverage. Nineteen others self-insure at least some of their health plans. In fact, Wisconsin has been self-insuring its employees’ dental and pharmaceutical benefits for years with excellent results.

Private companies further prove the model’s effectiveness. Fifty-eight percent of all private sector employees are enrolled in self-funded plans. Businesses that self-insure save up to 12 percent on health expenses.

It’s unclear why state lawmakers left tens of millions of dollars on the table by rejecting self-insurance this budget session. But they’ll have the chance to correct their mistake during next year’s inevitable budget crunch.

For the sake of taxpayers and state employees, let’s hope they take it.

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Bill headed to Senate would provide ‘safety blanket’ for benefit plans

The article below was published on May 1, 2017 by the Employee Benefit Adviser, written by Brian Kalish.

Nearly half of all employees are covered by a self-insured group health plan. Many companies that offer these plans have separate stop-loss insurance policies to protect them against the risk of catastrophically high claims. Some states and the Obama administration have attempted to regulate stop-loss insurance; a move the Self-Insurance Institute of America says would render it unaffordable.

To provide more certainty in the marketplace, the SIIA — a Simpsonville, S.C.-based member-based association — worked to introduce the Self-Insurance Protection Act.

The bill on April 5 passed the House of Representatives in a 400 to 16 vote and is now expected to be introduced in the Senate in the next few weeks. EBA spoke with SIIA’s CEO, Mike Ferguson, to understand more about the legislation. What follows is an edited version of the conversation.

EBA: What is the background on this bill?

Mike Ferguson: Shortly after the passage of the Affordable Care Act, there were policymakers within the Obama administration that became concerned that the growth of the self-funded market was coming at the expense of the public exchanges. The analysis was that the self-funding market is growing and the employers in the self-funding market are scooping up the good risks — their employees — and leaving the bad risks to go into the exchanges, which would create structural problems for the exchanges.

They further believed that the self-funded market was growing artificially, characterizing their analysis, facilitated by stop-loss insurance with relatively low attachment points. They believed that many of these self-funding plans were trying to look for an escape hatch out of the ACA requirements.

Really, these were fully-insured arrangements and they should be treated and defined as such for purposes of the ACA. There was discussion within the administration and a formal request for information was issued by HHS and DOL, which asked very pointed questions about self-funded insurance and stop-loss insurance. It was clear from the line of questioning that regulators were looking to try to show that employers were moving in this direction as a way to game the system and get out of the ACA mandates.

Subsequent to that, we learned there was discussion within the Obama administration on, ‘What do we do about this and how [do we] get our arms around these self-funded plans,’ because theACA did not provide any particular recourse.

EBA: How did the talk on Capitol Hill progress?

Ferguson: The discussion that we become aware of was, ‘What if we just take an aggressive definition of what insurance is and bring those employers back in as regulated entities as fully-insured employers or health insurance issuers?’

That was the internal discussions that were going on within agencies. A couple of years ago, in recognition of this, we said how do we address this because once you have a regulatory process commence, it is very difficult to push back on that. What we did, we worked with friends on the Hill to get legislation introduced, which would head off a regulatory interpretation of the definition of health insurance and health insurance coverage to specifically exclude self-insured plans with stop-loss insurance. This was in anticipation of potential regulatory action.

The previous version of that bill, like most pieces of legislation, ultimately did not move. This year, it has. And to put it in context, given the changes in the presidential administration, that threat is not at our doorstep anymore. But, our view is administrations can change in as early as four years. We don’t know who will be in the White House in three years and 10 months, so let’s go ahead and make sure that we get this done so that a future administration that might be unfriendly to self-insurance, does not have that avenue to disrupt the marketplace.

EBA: What does the legislation mean for employee benefit brokers?

Ferguson: It provides more certainty in the marketplace that stop-loss insurance will be available to self-funded plans. It does not change the current landscape of the self-funded marketplace. It is a safety blanket.

For employers that go to self-insurance, it is designed to be a long-term risk management strategy. Self-insurance is not designed for when an employer received a high quote on their health renewal premium and says, ‘OK, I’m going to pop over and be self-insured this year, but then switch to fully-insured two years down the road.’ That is not what employers should be looking at.

They should be looking at if they want to take a proactive long-term strategic risk to managing their healthcare risks, self-insurance can provide that option. But, it is most effective when it is an option that is deployed over multiple years. This legislation is a safety blanket for those advisers working with employers, because it takes one variable out of the regulatory environment going forward. It makes it almost impossible for anything at the federal level to disrupt their ability to self-insure to the extent that they have to access stop-loss insurance.

EBA: What is the bill’s future?

Ferguson: As a general matter, it is always tough to get anything through the Senate. That being said, since we had such a large vote margin out of the House, the Senate does, in many cases, look at that as a consideration on how it wants to move things.

Given that, we are cautiously optimistic. Cleary, we have full expectations that President Trump would sign the legislation to the extent that it is voted out of the Senate. The Senate is tricky to get anything done, even small rifle shot bills, like ours.

We have a lot of friends in the Senate. We expect the companion bill will have several prominent co-sponsors when it is announced and given that there was minimal Democratic opposition in the House, we hope that will translate to a similar dynamic in the Senate.

A change for small biz could cost some employers their custom health plans

The article below is from Crain’s New York Business, written by Caroline Lewis

Park Slope Food Coop is among the employers that could be forced to join the small-group health insurance market

Faced with rising premiums in the group health insurance market, the Park Slope Food Coop opted five years ago to create a custom plan for its 74 full-time employees and their family members and pay for the costs directly.

“I’m convinced we would have had to raise prices if we weren’t self-insured,” said Joseph Holtz, general manager, who estimates self-insurance saves the co-op $300,000 to $500,000 a year.

The co-op is one of several hundred New York employers that will be forced to stop self-insuring next year, thanks to a change in the state’s definition of a small business. Small businesses, until recently defined as having between one and 50 employees, are not eligible to purchase so-called stop-loss insurance, which kicks in when health care costs exceed a certain threshold. Without it, self-insurance is too risky. Now the state’s definition includes companies with 51 to 100 employees. The law had largely gone unnoticed before the change, said Michael Ferguson, chief operating officer of the Self-Insurance Institute of America. “In the under-50 market, not a lot of companies are self-insuring,” he said.

The deadline for employers of 51 to 100 people to give up their self-insured coverage was extended from 2016 to 2018, but legislation that would permanently grandfather them in has so far stalled in Albany.

The state Department of Financial Services declined to comment on the rationale for denying small businesses the ability to self-insure. According to The Commonwealth Fund, if employers with 51 to 100 employees self-insure in large numbers, they could undermine the risk pool of the small-group market, leaving it with older, sicker beneficiaries.

The Coalition for the Homeless, a nonprofit with 65 full-time employees, is among those hoping to continue to self-insure. If no solution is found, the organization said it will have to join the small-group market when its plan expires in November 2018.

“We could probably get a plan that provides similar coverage for a similar amount of money,” said Dave Giffen, the coalition’s executive director. However, he added, the organization wouldn’t be able to “share in the upside” if employees use less health care than anticipated.

Self-insuring has also allowed the organization more flexibility in designing its plan and has resulted in fewer burdens on employees, said Giffen. For instance, he said, the plan allows employees to bypass step therapy, or the process of trying less costly drugs first, when accessing medication. It also aims to keep down the cost of visiting out-of-network providers.

“At an organization like this, where we’re perpetually understaffed and asking people to work long hours in a very difficult job, we want to make sure they have not just adequate health coverage but generous health coverage,” said Giffen.

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How New York’s canceling health coverage for 130,000 workers

Article written by Michael W. Ferguson, as seen in the New York Post

New York’s state legislators are thinking small — literally.

The state’s definition of “small business” expanded Jan. 1, thanks to legislation passed in 2013. Many firms that thought of themselves as medium-size are now legally considered “small.” One consequence: They’re barred from choosing self-insurance — a form of health coverage that allows employers to pay their employees’ medical bills directly.

State legislators must restore this vital health care option for these newly small businesses. If they don’t, firms may have to slash their benefits — or stop offering them altogether.

Firms that offer conventional health insurance pay monthly premiums to insurers to cover medical claims for their employees. Companies that self-insure, by contrast, pay the doctor when an employee goes in for a check-up or an operation.

That can save businesses big money. By one estimate, companies can cut their health care costs by up to 25 percent by self-insuring.

Self-insurance also enables employers to provide higher-quality care. Because they’re not bound to the generic health care options provided by insurers, they can customize coverage for their employees’ unique needs.

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Study Confirms Savings Resulting From Telephone-Based Chronic Disease Management

telephone-based-chronic-managementA recently released study, based on claims data from 126,245 members participating in self-insured, employer-sponsored health benefit plans, reflected average annual per member cost savings of $1,157.91 for chronically ill individuals participating in a telephone-based chronic disease management program.

The results of the independent study, recently published in “Population Health Management”, showed 15% average savings in annual healthcare costs with the savings rising as participation in the program increased. Similar results have now been statistically validated in four different studies, conducted since 2006.

According to the Population Health Management Abstract, the impact of the payer-provided telephone based chronic disease management program on medical expenditures was evaluated using claims data from 16,224 members with a chronic disease in a group enrolled in the self-management program vs. 13,509 with a chronic disease in a group not participating in the self-management program.

Results Support Use of Patient Self-Management of Chronic Disease

The results support the use of the patented, population health management process provided by American Health Data Institute (AHDI), which is utilized by Diversified Administration Corporation and other leading TPAs throughout the U.S.

“By partnering with AHDI, Diversified uses motivational coaching and interviewing techniques to help patients develop the skills for disease self-management,” stated Brooks Goodison, President & CEO of Diversified. “We’re pleased to report that this study has once again confirmed that coaching chronic disease patients on self-management can be an effective tool for controlling healthcare expenditures.”

In addition to delivering lower transaction costs, patients receive the coaching service in their home at a time that coincides with their busy schedule. To view a copy of the entire study, go to http://online.liebertpub.com/doi/pdf/10.1089/pop.2015.0049.

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