By Edward M. Smith
When the Affordable Care Act was passed into law, one of its most popular provisions was the end of caps on the costs a healthcare plan would reimburse. No longer would anyone struck by catastrophic illness face being cut off by their insurance carrier.
But with that provision, many self-insured plans could no longer carry the added risk – particularly small and medium-size business plans and those covering workers who have multiple employers, such as union workers. The solution was for self-insured plans to buy what is known as medical stop-loss insurance, which allows self-insured plans to maintain their coverage while removing the caps, knowing stop-loss would cover extraordinary claim expenses.
As many as 100 million Americans have healthcare coverage through a self-insured plan, according to the Self-Insurance Institute of America. These plans have worked well; by self-insuring, businesses and unions can dedicate more assets to the actual cost of providing benefits. That's because they can forego the cost of higher premiums associated with blanket, no-cap coverage, knowing stop-loss will cover unexpected, catastrophic events that could weaken or destroy their plans. For many plans, it is a smart business decision that allows quality insurance to remain more affordable.
This solution, and the families who depend on it, is now threatened. At both the state and national level, there is a legislative trend to reclassify stop-loss insurance as health insurance, even though it is not health insurance. If successful, the reclassification would make stop-loss providers subject to the same taxes and regulations as health insurance providers, effectively rendering stop-loss too expensive for many self-insured employers and organizations. These employers and organizations would face three choices. They could become fully self-insured, which for many small and medium plans would be too risky. They could switch to one of the few major group health insurance carriers remaining, or choose to fold their plans and move participants to healthcare exchanges established under the Affordable Care Act.
The Obama Administration has signaled its support for the regulation of stop-loss providers as health insurers. Meanwhile, several states are already moving forward to severely restrict stop-loss insurance.
There has been significant attention paid by Presidential candidates and others to the so-called "Cadillac tax," and rightly so. But with a one-two punch of the "Cadillac tax" and the undermining of stop-loss insurance, the disappearance of existing healthcare plans for tens of millions of Americans is all but certain.
A bill pending in Congress, the Self-Insurance Protection Act, has been introduced in the House and Senate and would prevent reclassification of stop-loss insurance simply by affirming that it is not healthcare insurance.
The intent of the ACA was to expand coverage to the uninsured and protect quality coverage for those already insured. It was not to give large health insurance corporations a tool to improve their competitive edge, while at the same time undermining healthcare coverage for millions of Americans.
Self-insured plans successfully manage costs and provide for quality care. It's time for a bit of insurance from Congress to make sure our healthcare plans are safe. Absent a clear statement from the Administration that stop-loss insurance is not a target, lawmakers should pass the Self-Insurance Protection Act.
Stop-loss insurance is among the products Ullico Inc. offers through its affiliated insurance company, The Union Labor Life Insurance Company.