On Feb. 26, SIIA’s CEO and president Mike Ferguson testified before a House panel to make it clear that skirting the ACA is not the reason companies and institutions self-insure, contrary to what pro-reform elements in the federal government may believe.
The decision whether to self-fund is based on risk tolerance, understanding of legal liability, ability to cut costs and careful planning, Ferguson told the House Education and Welfare Committee’s Health, Employment, Labor & Pensions panel. The main drawbacks of self-funding were financial liability, legal liability, and the time and effort that must go into the act of self-funding health benefits, he said.
Expressing the view that self-insuring could be a threat to health care reform, Maura Calsyn, director of health policy at the Center for American Progress, said “lasering” — the practice allowing stop-loss insurers to set higher attachment points for employees with costly pre-existing conditions — could lead small employers to discriminate against employees who are a burden on the health plan.
Calsyn argued that companies that self-insure mainly to skirt reform’s insurance mandates could set up plans that shortchange employees by offering fewer categories of health coverage. While that would mean cheaper insurance for the healthier members of the workforce, it could lead workers with more expensive health conditions to leave the employer plan in favor of a plan in a health insurance exchange.
Calsyn said the problem of adverse selection or employment discrimination by self-funded plans was theoretical and not so concrete, when prodded by House members for examples.
Ferguson’s printed testimony said moves to dampen self-funding are not supported by the facts. Low attachment points are not evident in the market. Actuarial and consulting firm Milliman reported that the median specific deductible for groups with 50 or fewer covered employees was $35,000. For groups of 51 to 100 employees, the median was $45,000. Fewer than 0.3 percent of specific stop-loss policies had specific deductibles of less than $20,000, Ferguson stated.
Robert Melillo, an executive at USI Insurance Services, and Wes Kelley, an executive director with Columbia Power & Water Systems, Columbia, Tenn., also testified in favor of self-insuring.
Lobbying for Legislation
SIIA recently put its weight behind a bill in Congress — the Self-Insurance Protection Act (H.R. 3462/S. 1735) — that would clarify that stop-loss insurance is not health insurance. The legislation would amend the Public Health Services Act and parallel sections of ERISA and the Tax Code.