Filed Under:Health Insurance, Individual Health

PPACA: Sun Shines on Stop-Loss Market

(Graphic by Anna Langova.)
(Graphic by Anna Langova.)

Players in the small group health plan stop-loss insurance market have different ideas about what typical stop-loss "attachment points" -- the deductibles for self-insured  health plans -- really are.

Lee Johnson, president of Mid-American Benefits Inc., Omaha, Neb., says its typical client employer with 50 to 100 employees has a "specific" --  per-employee -- attachment of about $20,000 to $40,000.

Steve Gauldin, a vice president at TRISTAR Benefit Administrators, West Des Moines, Iowa, gives a range of $25,000 to $35,000 for a typical employer with 25 to 100 employees.

Becky Henderson of IMA Inc., Bossier City, La., says her company has only two small groups with specific stop-loss levels under $30,000. At IMA, she says, typical groups with 30 to 50 lives have specific attachment points of $30,000 to $50,000, and groups with 50 to 500 lives have attachment points of $50,000 to $125,000.

Blue Cross Blue Shield of Kansas, Topeka, Kan., says it offers specific attachment points of $10,000 to $75,000 for an employer with fewer than 100 employees.

Sandy Praeger, the Kansas insurance commissioner and chair of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., gives a list of state minimums in a letter sent on behalf of the NAIC.

In states with minimum attachment points expressed in terms of dollars, the lower limit is $10,000 in Kansas, Maryland, North Dakota and Oregon; $15,000 in Colorado; and $20,000 in Maine.

The Employee Benefits Security Administration (EBSA), an arm of the U.S. Labor Department, has posted the comment letters that provide those figures in a collection of 108 responses to a 13-question EBSA request for information (RFI) on stop-loss that was released in April.

Employers that self-insure group health benefits use stop-loss programs to limit their risk. A specific attachment point is to an employer with a stop-loss program what a per-family-member deductible is to an individual John Doe who buys ordinary individual health insurance from XYZ Insurance.

Empployers and stop-loss providers also use aggregate attachment points, or, in effect, deductibles that apply to a whole plan, not just a specific enrollee.

EBSA and other agencies put out the stop-loss RFI in April, after receiving suggestions that some small employers might use stop-loss programs to avoid having to comply with the Patient Protection and Affordable Care Act of 2010 (PPACA).

PPACA exempts self-insured plans from having to meet many PPACA requirements.

Self-insured plans already are exempt from state benefits mandates.

But, "in general, self‐funded employers tend to be more generous than average when it comes to premium contributions for the employees," says Janet Trautwein, chief executive of the National Association of Health Underwriters (NAHU), Washington. "Since plan designs can be adapted to accommodate claims and the unique needs of the workforce, employers may be more apt to pay more towards overall employee premiums and may adjust coverage so that employees have more benefit cost‐sharing."

Horace Garfield, a vice president in the stop-loss business at Transamerica Employee Benefits, Little Rock, Ark., says his company sees fewer than 10% of employers with fewer than 100 employees self-insuring and expects that percentage to stay about the same in the foreseeable future.

"Transamerica does not believe that stop-loss insurance has a major impact on the small group fully insured market," Garfield says.

Debra Ness writes on behalf of the National Partnership for Women & Families, Washington, says her group already is seeing stop-loss marketers sell the product as a tool for evading PPACA consumer and market protections. 

"The increase in the use of stop-loss insurance with low attachment points by self-insured small employer plans could potentially undermine the intent," of the law, Ness says.

Researchers at RAND Corp., Santa Monica, Calif., have published a study suggesting that PPACA is unlikely to lead to a big jump in small employers' use of self-insurance and stop-loss programs, but the researchers assumed in that study that the typical specific attachment point is $75,000 per employee, Ness says.

Today, however, insurers and others are emphasizing that their specific attachment points can be as low as $10,000, Ness says.

Some reading the comments might assume that benefit plan administrators would be in favor of expansion of stop-loss programs and self insurance and that insurers would oppose increased use of stop-loss, but, in reality, many companies that sell health insurance are also active in the self-funded plan market, according to Marc Marion, a vice president at American Fidelity Assurance Company, Oklahoma City.

"One strong indicator of the prevalence of self-funding is that the majority of the companies identified as large health insurers provide their service to far more self-insured employees than they do to fully insured certificate holders," Marion says. "Measured on the basis of 'covered lives,' these insurers would be more properly described as third party administrators. For example, in Aetna’s most recently stated required annual financial statement ... they describe their total population of commercial benefit members to be 16,626,000; of these 11,868,000, or 71.4%, were in employer self-funded plans, not covered by health insurance."

Some commenters, such as the National Partnership, 13 of the individuals who represent consumer interests in NAIC proceedings, and a coalition of advocacy groups led Consumers Union, Yonkers, N.Y., say they would like to see federal agencies help regulate small groups' use of stop-loss insurance.

Other commenters, such as NAHU and the Alliance of Community Health Plans, Washington, say they think the NAIC is the appropriate source for guidance on the matter.

Many commenters offer general information about the stop-loss market.

Alissa Fox, a senior vice president at the Blue Cross Blue Shield Association, Chicago, says public reports show that about 12% to 15% of group plan claims covered by stop-loss programs reach the attachment point.

In 2011, the loss ratio for stop-loss was 73.8%, with an average per-member per-month premium of $21.92, Fox says.

Some benefits firms have provided specific administrative cost estimates.

At Mid-American Benefits, Lee Johnson says his firm's typical administration fee for a self-insured plan is $17 per employee per month (PEPM). A typical pre-certification vendor charges $2 PEPM, and a typical preferred provider organization charges $5 PEPM, for a total of about $25 PEPM, he says.

The administrative costs are much lower than for Medicare, Medicaid or typical fully insured plans, Johnson says.

Nicole Andelin of CNIC Health Solutions Inc., Greenwood Village, Colo., says about 4% of the typical CNIC client's plan spending goes toward paying administrative and network access fees.

Stop-loss fees and stop-loss broker commissions total about 10% of a self-insured client's plan costs, Andelin says.

Correction: An earlier version of this article described NAHU's location incorrectly. NAHU has moved to Washington.

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