1. The ACA-Does it Create the Perfect Environment for Self-Insured Health Programs?
March 29, 2018

2. Does the ACA create the Perfect Environment for Self-Insured Plans?
When firms offer healthcare plans to their employees, they have two main choices. They can buy insurance from traditional health insurers or they can self-fund their own healthcare plan.

3. The ACA and Self-Insured Health Programs
Self-insured Plans-are those in which the employer takes on the financial risk of providing a defined set of health care benefits to the firm’s employees and dependents. The employer usually hires a TPA to help run the healthcare plan. A self-insuring employer pays directly for the claims incurred by the plan’s enrollees, as opposed to paying a set premium to an insurance company.

4. Does the ACA create the Perfect Environment for Self-Insured Plans?
Due to the Employee Retirement Income Security Act of 1974 (ERISA), self-insured plans are not subject to state insurance market regulations.
Most large firms self fund their healthcare programs, rather than buy insurance.
In general, total costs for self-funding are lower than traditional health insurance because self-funding does not absorb the marketing costs and profit margins of traditional health insurance.

5. Does the ACA create the Perfect Environment for Self-Insured Plans?
Because self-insurance is regulated under the federal Employee Retirement Income Security Act (ERISA), self-insuring firms with employees in multiple states can offer uniform benefits to workers across state lines.
Costs are based on the employer’s own claims experience and are not pooled with others, as they might be for smaller firms purchasing fully insured plans in the commercial market.
Increasing medical costs and willingness to assume more risk are driving many employers, including small employers, to shift to self-insured health plans.

6. The ACA and Self-Insured Health Programs
ACA Impact:
Since the enactment of the ACA the number of individuals in self-insured plans increased from million in 2013 to million in 2016.
From 2013 to 2015, the percentage of employers by size that offered at least one self-insured plan changed as follows:
Small employers (fewer than 100 employees)—increased from 13.3 percent to 14.2 percent.
Midsize employers (100 to 499 employees)—increased from 25.3 percent to 30.1 percent.
Large employers (500 or more employees)—decreased from 83.9 percent to 80.4 percent.

7. The ACA and Self-Insured Health Programs
The Affordable Care Act (ACA) changed the small-group insurance market substantially, but most changes do not apply to self-insured plans.
This exemption provided an opening for small employers with healthier workers to avoid broader sharing of health care risk, isolating higher-cost groups in the fully insured market.
Two factors are driving the increase in self-insured businesses: rising health care costs and insurance market instability.

8. Why do employers choose self-insured plans?
There are several reasons why employers choose the self-insurance option. The following are the most common reasons:
The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
The employer maintains control over the health plan reserves, enabling maximization of interest income - income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.

9. Why do employers choose self-insured plans?
The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).
The employer is not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value.
The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.

10. Does the ACA create the Perfect Environment for Self-Insured Plans?
The ACA significantly changed the incentives to self-insure by exempting self-insured plans from several provisions. Most important:
Self-insured plans will provide an experience-rated option to healthy small groups post-reform.
Self-insured plans are not subject to the ACA’s medical loss ratio requirements.
Firms with healthy workers may seek out self-insurance options to offer more economical plans that do not meet the Affordable Care Act’s standards.

11. Does the ACA create the Perfect Environment for Self-Insured Plans?
Self-funded plans have a great deal of flexibility in plan design;
For example, if its workforce included a high number of smokers, the small firm could include more rigorous incentives to stop smoking than a traditional health insurance policy – which would otherwise be limited by community rating requirements.

12. Does the ACA create the Perfect Environment for Self-Insured Plans?
Each benefit may be priced by the plan administrator based on how much it will raise the cost of the plan, both from a claims perspective and a stop loss insurance perspective. As employers get smaller, self-funded health plans (often designed by the TPA) tend to become more standardized.
Self-insured plans can successfully help employers by avoiding adverse selection like in the fully insured marketplace.

13. Does the ACA create the Perfect Environment for Self-Insured Plans?
Still, an employer may wish to add or subtract benefits to accommodate its budget while still meeting the requirements of federal and/or state law, based on the needs of its employees. For the largest plans, almost any benefit can be added—for a price.

14. Does the ACA create the Perfect Environment for Self-Insured Plans?
If self-insured plans have so many benefits then why isn’t everyone doing it?
the answer is RISK.

15. Does the ACA create the Perfect Environment for Self-Insured Plans?
What are the drawbacks?
Self-insured companies pay the actual medical claims incurred by their workers as they arise. So if the staff has a particularly bad health year filled with unusually expensive claims, the employer’s costs go up for that year. The risk is particularly high for smaller businesses that don’t have the cash flow to cover unexpected costs.

16. Does the ACA create the Perfect Environment for Self-Insured Plans?
A shift to self-funding may lead to adverse selection in the third party insurance market for small groups.
Such adverse selection could potentially weaken the entire traditional health insurance market for small groups because it would come to cover mainly firms with older and less healthy employees.

17. Does the ACA create the Perfect Environment for Self-Insured Plans?
Most firms use stop-loss insurance to limit their potential losses. Stop-loss insurance is not protected by the guaranteed issue and renewal provisions of the ACA.  
Since stop-loss policies are issued on an annual basis without any guaranteed renewal, an unexpected rise in the healthcare costs at a small firm can lead to much higher premiums the next year or outright cancellation of the policy. Running the risk of the firm becoming insolvent.

18. Does the ACA create the Perfect Environment for Self-Insured Plans?
Which ACA provisions apply to Self-insured plans?
Dependent coverage for adult children up to age 26;
Coverage of preventive health services without cost-sharing (grandfathered plans are exempt);
No rescissions of coverage, except in the case of fraud or intentional misrepresentation of material fact;
No lifetime limits on essential health benefits and annual limits are restricted until 2014 (in 2014, all annual limits are prohibited); and
Improved internal claims and appeals process and minimum requirements for external review (grandfathered plans are exempt).

19. Does the ACA create the Perfect Environment for Self-Insured Plans?
What ACA provisions do not apply to self-insured plans?
Essential Health Benefits Package
Medical Loss Ratio Rules
Small Employer Tax Credit
Review of Premium Increases (annual review of unreasonable increases in health coverage premiums)
Annual Insurance Fee
Methods to Allocate Insurance Risk (reinsurance, risk corridors and risk adjustment)
Insurance Market Reforms (guaranteed issue and renewability) (Insurance premium restrictions, 3:1 rule)

20. Does the ACA create the Perfect Environment for Self-Insured Plans?
While self-funding may not be right for every employer, every employer has the right to consider it and decide for themselves.

21. Association Plans
The Department of Labor (DOL) issues proposed rule for Association Plans.
The U.S. Department of Labor (DOL) announced a Notice of Proposed Rulemaking to expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health Plans, also known as Association Health Plans.
The regulation would modify the definition of “employer,” by creating a more flexible “commonality of interest” test for the employer members that the Department of Labor had adopted.

22. Association Plans
Under the proposal, small businesses and sole proprietors would have more freedom to band together to provide affordable, quality health insurance for employees. 
The proposed rule, which applies only to employer-sponsored health insurance, would allow employers to join together as a single group to purchase insurance in the large group market. By joining together, employers may reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options. 

23. Association Plans Examples of Employers:
A franchisor could set up a plan for its franchisees nationwide. Or it’s possible the International Franchise Association, which has 743,000 members with several million employees, could create one.

24. Association Plans Potential Impacts
Because they would not be subject to individual and small group market rules, AHPs in the large group market (which the Department expects would include all or almost all AHPs) would enjoy greater flexibility with respect to the products and prices they could offer to small businesses.
The proposal seeks to enable AHPs to assemble large, stable risk pools.

25. Association Plans
Impacts on both individual and small group markets. In both cases, AHPs could offer many small businesses more, and more affordable, coverage options than otherwise available. With respect to individual markets, many of those insured there now might become eligible for AHPs. AHPs could enroll both working owners and employees of small business that do not currently offer insurance but might elect to join AHPs.
Some Medicaid- eligible workers may become eligible to enroll in AHPs under this proposal.

26. Association Plans
Because AHPs often can offer more affordable alternatives to individual and small group insurance policies, it is possible that this proposed rule will extend insurance coverage to some otherwise uninsured individual families and small groups.
The proposal is likely to have offsetting effects on the federal budget, with some increasing the deficit and others reducing the deficit. On balance, deficit-increasing effects are likely to dominate, making the proposal’s net impact on the federal budget negative.

27. Association Plans NAIC’s Concerns:
Recommend that DOL affirm in the final AHP Rule that the changes in no way limit the ability of states to regulate MEWAs, insurers offering coverage through MEWAs, and insurance producers marketing that coverage to employers.
To confirm that states retain full authority, as recognized by the Erlenborn-Burton amendment to ERISA, to set and enforce solvency standards for all MEWAs, and comprehensive licensure requirements and oversight for non-fully-insured MEWAs.

28. Association Plans
That states retain full authority under ERISA’s saving clause to regulate the terms of the insurance coverage that may be offered to fully insured MEWAs.
Given that bad actors have historically used any ambiguity regarding ERISA preemption as a shield to challenge state oversight and defraud consumers, it is critical that the final rule dispel any questions.

29. Budget Spending Bill
The Senate recently passed a $1.3 trillion spending bill early Friday, March 23, 2018 for President Trump to sign.
This bill will keep government agencies operating through September.
The budget did not include funding for CSR payments or a federal reinsurance program.

30. Budget Spending Bill What are Cost Sharing Reductions (CSR)?
A discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance.
Why Are Cost-Sharing Reductions at Risk?
The CSR subsidy is a critical part of the ACA’s package of financial assistance to help individuals afford coverage.
80 percent of Mississippi exchange enrollees are receiving cost-sharing reductions — the highest percentage in the nation.

31. Budget Spending Bill
President Trump ended CSR payments last fall, but supported health care measures presented by Sens. Collins and Alexander to lower premiums and fund CSR’s for two years.
However, those measures were omitted from the budget spending bill.

32. Budget Spending Bill
Without the restoration of CSR payments or a federal reinsurance program that would have helped subsidize care for high-cost plan members, some health insurers could hike premiums further or exit the individual market altogether.

33. Mississippi Insurance Department
(601) • (800)