California insurance regulators are introducing, to the dismay of the insurance industry, controversial legislation to limit self-insurance for small businesses that they say undermines the federal health care reform.
Dave Jones
California Insurance Commissioner Dave Jones is expected to propose legislation this week that would bar insurers from selling stop-loss policies below a certain amount. The dollar figure is still under consideration, although some experts recommend a minimum of $40,000 per worker, according to the Los Angeles Times.
This proposal would make self-insured plans less attractive for small employers because they would need to cover more of their employees’ medical bills.
In the past self-insurance was used only by large employers with the financial resources to pay for expensive medical claims. Last year, 60% of U.S. workers with health coverage were in self-insured plans, according to a Kaiser Family Foundation study.
Now some insurers are targeting smaller businesses of 25 employees or less with stop-loss policies, which are self-insurance plans designed to limit employer payouts for big claims. These policies guarantee that businesses won’t be responsible for anything more than a certain amount per employee, sometimes as low as $10,000 or $20,000, with the rest paid by an insurer.
Jones said self-insurance policies undermine a key principle of the Patient Protection and Affordable Care Act (PPACA), the federal health care reform, that would lower premiums by allowing insurers to share the risk through health insurance exchanges, the newspaper reported. That law is under a U.S. Supreme Court review this week.
Additional regulators and health policy experts say that stop-loss plans undermine the idea of self-insurance because employers do not bear a significant amount of the risk and they allow companies to avoid certain state insurance regulations. They also say that insurers are selling the plans to companies with healthier workers, which could undermine the PPACA’s goal to group healthy and sick individuals together to lower premiums.
Insurance industry officials argue that self-insurance is a response to employer demands for more affordable coverage and that regulators shouldn’t interfere in the market, according to the Los Angeles Times.
There’s no evidence that insurers are targeting companies with healthier employees, according to Mike Ferguson, chief operating officer of the Self-Insurance Institute of America (SIIA), a trade group.
“We are concerned about regulators’ actions because self-insurance is arguably one segment of the healthcare market that is working well,” Ferguson said in a statement. “These companies are generally able to control costs better and offer more customized benefits.”
California wants to limit stop-loss policies used by small employers via IFAwebnews.com .
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