06.08.2012 11

Obama Administration Signals that Small Businesses May Not Get to Keep Their Self-Insured Health Plans

ObamaCareBy John Vinci — Imagine that, in order to increase competition among grocery stores, the government created local farmers’ markets all across the country.  Anyone could sell food within these farmers’ markets — including the grocery stores.  But when the grocery stores refused to participate, the government enacted regulations to force them to do so. Thus, what was meant to encourage competition instead became the means of suppressing it.

Similarly, the Obama Administration has signaled that it may create new regulations in order to protect Obamacare’s online health insurance marketplaces called Health Insurance Exchanges. Despite Obama’s promise that if you like your health plan you can keep it, some small businesses may not be able to keep their self-insured health plans if the Obama Administration has its way.

Last month, the Department of Health and Human Services (HHS) published a Request for Information (RFI)[1] notice in the Federal Register signaling that the Obama Administration may regulate small, self-insured health plans, making it difficult or impossible for small businesses to insure their employee’s health benefits themselves instead of purchasing a plan from an insurance company.

An increasing percentage of American workers obtain their health insurance from employers who self-insure their employees’ health benefits by assuming the risk of paying their employees’ health claims.[2]

Self-insurance is attractive to businesses because it provides them the flexibility to design their own health plan.  Plus, many employers find it a less expensive alternative to purchasing health insurance from an insurance company.  And, while self-insured plans are subject to federal regulation, federal law prohibits states from regulating them.[3]

Large employers that self-insure have the personnel to manage the plan and can spread their risk between their many employees.  But small employers typically hire an outside, third-party expert to manage their self-insured plan.  They also purchase stop-loss insurance to protect themselves from the potential of unusually high health claims.

For example, a small company might be willing to pay a limit of up to an average of $20,000 per employee for health claims in a year.  But that company might be ruined financially if claims in a particular year spike too high.  To protect itself, that company, then could purchase stop-loss insurance to reimburse them should their actual spending on health claims surpass a certain limit. That limit is called an “attachment point.”  It is the point at which the stop-loss insurance plan kicks in and reimburses the employer for claims it pays over a chosen limit.

Stop-loss plans can have attachment points that are low enough to make it feasible for small businesses to accept the risk of implementing their own self-insured health plan.

While subject to many of Obamacare’s new mandates, self-insured plans are not subject to the Essential Health Benefits, risk pooling, risk adjustment, rate review, or medical loss ratio mandates.[4]

This concerns liberal “consumer advocates” like Professor Timothy Jost of Washington and Lee University School of Law.  Jost calls self-insurance a “loophole” in Obamacare.[5]  Jost and other Obamacare ideologues have called on the Obama Administration to use its regulatory powers to close this so-called “loophole.”[6]

Their particular concern is that self-insured plans with low attachment points are a risk to Obamacare’s Exchange marketplaces.  Now HHS, in its RFI is echoing this concern.

For this reason, we expect that the information collected from the RFI will be the basis of a future regulation.  We further expect that such a future regulation may regulate self-insured plans with stop-loss insurance and thereby may attempt to make it difficult or impossible for small businesses to self-insure.

The problem with government-created marketplaces is that the government feels obligated to protect them — even at the expense of competition and market alternatives.

John Vinci is a staff attorney with Americans for Limited Government and is the editor in chief for the www.obamacarewatcher.org website.

* * *

[1] Request for Information Regarding Stop Loss Insurance, 77 Fed. Reg. 25,788 (May 1, 2012) available at http://www.gpo.gov/fdsys/pkg/FR-2012-05-01/pdf/2012-10441.pdf.

[2] Michael J. Brien and Constantijn W.A. Panis, Deloitte, Self-Insured Health Benefit Plans 5 (Mar. 23, 2011) available at http://www.dol.gov/ebsa/pdf/ACASelfFundedHealthPlansReport032811.pdf.

[3]Employee Retirement Income Security Act, 29 U.S.C. § 1144(a) (2011).

[4]Timothy Jost, Loopholes in the Affordable Care Act: Regulatory Gaps and Border Crossing Techniques and How to Address Them, 5 St. Louis Univ. J. of Health L. & Pol’y 27, 77.

[5] Id. at 79-81.

[6]Id. at 80-81. See also Kathryn Linehan, Self-Insurance and the Potential Effects of Health Reform on the Small- Group Market, Issue Brief 840, National Health Policy Forum (Dec. 21, 2010) available at http://www.nhpf.org/library/issue-briefs/ IB840_PPACASmallGroup_12-21-10.pdf; Russell B. Korobkin, The Battle Over Self-Insured Health Plans, or ’One Good Loophole Deserves Another’, 1 Yale J. of Health Pol’y, L., & Ethics 89–136 (2005); and Mark A. Hall, Regulating Stop-Loss Coverage May Be Needed to Deter Self-Insuring Small Employers From Undermining Market Reforms, 31 Health Affairs 316–323 (2012).

  • thsldu

    More lies from the liar-in-chief!

  • LeonardWGiddensJr

    We don’t need any favors from this fraud. What we need is for him to vanish and take is healthcare and with him.

  • Don

    People need to stop and think very hard and I mean right now that if the SOB new “Jim Jones” AKA Barrack Obama did get his health care plan that he wants once he had it in place it would be almost imposable to get rid of. It but the main thing people need to consider is the fact that it may be cheap the first few months and everyone knows that once the Government gets there fingers into anything they will find a way to get all they can from it so if they say it is unsustainable without raising the cost then the people would be required to pay even more. It does not matter if you make $1,000.00 dollars a month and that is all you get the Government will raise the cost of the Insurance to $1,200.00 per month and you have to pay it there will be no excuse the same way the taxes are collected. That is the way it is and you have no choice and there is no take it or leave it you will pay the $1,200.00 per month even though you only make $1,000.00 per month. The Government do not care so you have to put your children out on the street corners to get the other $200.00 and if you want to eat then that is your problem figure it out jest pay what the Government wants you to pay.

  • NCBigmouth

    No sh** Dick Tracy!!  Where did you get your clue? 

  • jmsmaxwell

    Herr Okenya, is made his dictortial ruling,  You vill comply or else!   Sounds more and more
    like Staline, Hitler, Misoulini, Pot Pol and a lot of other tinpot wannabe dictators as time
    goes on.  The closer to the election his delousions will incrase till he will have a melt donw
    and declare himself dictator for life.   Okenya and Moochella will have to be pryed out of
    the White House much like when Clinton left and took the keys of the keyboards and funitur
    along with them when they left.    But this is nothign new for the corruption of the leftist.

  • sb36695

    This small business owner has cancelled her health insurance.  Since Congress has abdicated their duty, I must wait until Nov. 6, 2012.  If Obama is reelected, I am closing.

  • Just another LIE.  A person cannot believe anything this imposter Obama says.  PLEASE, PLEASE, PLEASE WAKE UP FOLK.

  • Jagraham

    This  sure works for us!  THE BEST WAY, “THANK ABOUT IT”, JIM.  WRITTEN BY A 21 YEAR OLD FEMALE I am going to let the   Republican nominee know that   we have found him a VP from Texas that truly understands the situation at hand. Wow, this girl has a great plan!  Love the last thing she would do the best.  This was written by a 21 year old female who gets it.  It’s her future she’s worried about and this is how she feels about the social welfare big government state that she’s being forced to live in!  These solutions are just common sense in her opinion.  This was in the Waco Tribune Herald, Waco, TX , Nov 18, 2011  PUT ME IN CHARGE . . .  Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese and away. If you want steak and frozen pizza, then get a job.         Put me in charge of Medicaid. The first thing I’d do is to  get women Norplant birth control implants or tubal legations. Then, we’ll test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.  Put me in charge of government housing.  Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your ” home” will be subject to inspections anytime and possessions will be inventoried.  If you want a plasma TV or Xbox 360, then get a job and your own place.  In addition, you will either present a check stub from a job each week or you will report to a “government” job.  It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22 inch rims and low profile tires and your  blasting stereo and speakers and put that money toward the “common good..”  Before you write that I’ve violated someone’s rights, realize that all of the above is voluntary.  If you want our money, accept our rules.  Before you say that this would be “demeaning” and ruin their “self esteem,” consider that it wasn’t that long ago that taking someone else’s money for doing absolutely nothing was demeaning and lowered self esteem.  If we are expected to pay for other people’s mistakes we should at least attempt to make them learn from their bad choices.  The current system rewards them for continuing to make bad choices.  AND While you are on Gov’t subsistence, you no longer can VOTE!  Yes, that is correct.  For you to vote would be a conflict of interest.  You will voluntarily remove yourself from voting while you are receiving a Gov’t  welfare check.  If you want to vote, then get a job.  Now, if you have the guts – PASS IT ON… I WOULD REALLY LIKE TO GET THIS BACK, IF EVERYONE SENDS IT, I WILL GET OVER 220 BACK!!!  I WOULD KNOW YOU SENT IT ON!!!   No virus found in this message. Checked by AVG – http://www.avg.comVersion: 2012.0.1913 / Virus Database:  2425/4990 – Release Date:  05/10/12

  • Greg137

    We already know we won’t, and that is why we have to repeal Obamacare, and go back to the capitalist system that we all know and love!

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