After spending much of the past 4 months on the road speaking at various conferences, one thing is clear - people are freaking about health care reform.   Not the fact that it is happening but that so many issues are unresolved and answers are unclear.  Many of the details are just not known yet and it is frustrating to everyone.  I am still waiting to hear the true meaning of "grandfathering"!!!!  What is it?

The main factor that hasn't been addressed with reform is the rising costs of health care and that is where the self insured industry can make the difference.  We need to begin innovating and collaborating now.  Let's face the fact that health care reform is here and take the lead in promoting cost savings that this industry desperately needs.

Recently, America's Health Insurance Plans (AHIP) stated that it fears that employer-sponsored self-funded plans will siphon off healthier, cheaper beneficiaries to create isolated, lower-risk pools, which an AHIP official said could force insurers to raise premiums as health reform moves the country toward more universal coverage.  Really?  Well, what is the true underlying cause of AHIP's statements?  This same official stated that self-funded plans threaten to deprive the insurance industry of healthy lives that support large risk pools.

Insurers are concerned about "adverse selection and ability of smaller and smaller firms to pull themselves out of the exchange and go into the business of self-funding - which would be very, very bad for the structure of the exchanges," said Scott Keefer, VP for policy development at AHIP. He was speaking on April 30 at a hearing sponsored by the Alliance for Health Reform in Washington, D.C.

Self-funded plans may also pull themselves out of the pool because that way they can avoid state taxes on health insurance premiums, Keefer said.  He also said the following:

1. Smaller and smaller firms might choose self-funding, because incentives to self-fund are stronger under reform

2. Whereas previously, the threshold for self-funding may have been groups of 500 or more, after reform that threshold may decrease to 300 or less for young, healthy groups.

3. Self-funding employers are able to get the job done cheaper than insured plans because they can tailor plan design, have lower administrative costs, do not operate for a profit and have access to claims data, which insurers often refuse to share.

We need to take advantage of all of this.  The rivalry of insured versus self-insured has been around for years but the danger is that reform will persuade all kinds of companies to move away from employer-based coverage.

HHS will be doing an annual study on impact of exchanges on market dynamics, adverse selection and self funding.  By April 1, 2011, HHS will report on whether self-insurance is more affordable than insured coverage.  In addition, HHS will review the likelihood of self-insured plans not being able to pay obligations or becoming financially insolvent; and the extent to which rating rules are likely to cause adverse selection in the large group market or to encourage small and mid-size employers to self-insure.

I think it's pretty curious that AHIP was responsible for this inclusion in the rules!!!!  What do all of you think?  Do you agree with my conspiracy theories?

 

Adam Russo

The Phia Group

Comments

[Rick Paul]

STOP SOCIALIZING HEALTHCARE! AMERICANIZE IT!

The problem with Health Insurance is that it has evolved into a socialistic system. Take for instance, party A, the patient who gets care from party B, the provider and party C, the payer, pays the cost to Party B on behalf of Party A. Party C then needs to increase the premium to afford to continue to pay Party B who is able to charge whatever and without disclosing costs to Party A. Party A sees an increase in premium but their employer pays most of it (if they are lucky enough). Party A decides to go and get their moneys worth so goes back to Party B. Party C gets the bills and voila we have a circle and spiral into a socialistic disaster.

How can this be fixed?

I suggest Americanizing it:

1. Lobby to pass a law (prefer Fed but will take state) that requires every healthcare provider to disclose what percent of Medicare they will accept as payment in full that does not discriminate by whom the patients payer is.

2. Design insurance plans to reimburse up to a percentage of Medicare, e.g. 150% of the Medicare allowable.

3. Reward the insureds for finding a facility or provider that will accept less by having it offset their deductible or coinsurance. The converse happens as well, the insured is free to go to a more expensive provider, but bears the financial responsibility.

4. Use ERISA, Plan Language and ID Cards to explicitly outline how assignment of payments works along with details regarding consideration to help minimize balance billing issues.

5. Include the cost of the employees deductible and coinsurance in their funding so the provider is paid by one payer. Rebate unused money to the employee at then end of the year. This will result in timely payment to providers and reduce the need for them to collect deductibles and coinsurance. The providers would love this part.

Until basic economic forces prevail in healthcare we will continue to see costs escalate.

The above is simple, and requires a paradigm shift.

Self funding is insurance at cost. It is more efficient than a nonprofit insurance company.

We need to Americanize health insurance not socialize it!

Rick Paul, ASA, MAAA
President
USBenefits Insurance Services, LLC