In Part 1, we became acquainted with a new self-funded plan for local physicians offices. Now, we'll look at some of the other major problems facing folks who opt in.
Back in the day, MEWA's were a popular option. Multiple Employer Welfare Arrangements made it possible for smaller companies in the same industry to band together to purchase self-funded insurance plans. The idea was that none of them individually were large enough to make the numbers work, but taken as one large group, such an arrangement was economically feasible. Unfortunately, many of these arrangements were poorly run, and soon went belly up.
While I'm more familiar with MEWA's and self-funded plans than many of my colleagues, I knew that I was far from expert in either. So I turned to someone who is such an expert, and who just happens to be my co-blogger. I called Bob, and together we noodled around the PHA site. In the meantime, I'd also gotten a quote from another carrier which was actually quite a bit lower than the PHA numbers (even factoring in pre-existing conditions). Armed with our newfound knowledge of the PHA plan, and the new quote, Bob helped to crystallize some important points:
First, the plan is not subject to state insurance laws, but rather the Federal law called ERISA (Employee Retirement Income Security Act of 1974). This means that, if something goes wrong, there'll be no access to the state's guaranty fund if PHA goes down the tubes. Thus, if one is in mid-claim, and the plan runs out of cash, to where would one turn?
Well, one place is directly back to the employer, which could be liable for any unpaid claims. Not a comforting thought.
Second, there are some significant adverse selection issues. For example, who's switching to this "new" plan? That would be groups that can't get lower rates elsewhere. And why would this be? Well, if they've had some major claims and pre-existing conditions. So it's likely that only groups with "issues" are going to jump onto an untried "new" plan.
And since PHA will have no idea what these problems are [ed: well, at least not until the claims start rolling in], how will these conditions be handled? Again, poking around the site, there's no mention of how (or indeed, if) pre-existing conditions will be covered.
Third, the site very prominently (indeed, proudly) displays the rates for its products. These are based solely on family status (single, married, etc), not based on age or sex. That's a great deal for young pregnant women, and older males with heart problems.
Not such a good deal for most folks.
And exactly how do they know that $313 is the appropriate premium? Remember, there's NO underwriting info. As I cautioned my client, since they can't disclose on-going conditions or claims, how many of the other groups are also withholding this crucial info? How many claims are going to be sitting on Mr Kenrick's desk on January 2nd? How likely is it that they'll ALL be paid?
Fourth, absent any written guarantee (and it is indeed absent here), when are rates going to go up to cover the unanticipated claims? There's no way to know for sure (since this is not disclosed), but perhaps this item (from the "What happens after I apply for membership" section) provides a vital clue:
"A PHA Board Meeting is held every three months where applications to the PHA are reviewed and approved. These occur the first Friday in February, May, August and November."
Is this when they change rates, as well?
Finally [ed: yay!], Bob asked, "since we already know the rates for the [insured] plan are at best lower and at worst the same as PHA's, why would they roll the dice to go from a known entity to something untested and unguaranteed?"
Indeed.
This morning, Bob emailed to add "No stop loss would be a deal breaker in my book. Good chance they can't get a carrier to bite off on it. I can't think of any that write MEWA's any more, much less a virgin one.
This thing could blow up in 6 months. This is 6 o'clock news stuff."
'Nuff said.
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