Regular readers are familiar with our "Stupid Carrier Tricks" series; a lesser-known version recounts those all-too-infrequent occasions where a carrier "gets it right." I'm very pleased to say that this is one of the latter.
In an email I received yesterday, Aetna says that it's finally had enough of agents and employers taking advantage of the low rates afforded to and by high deductible health plans. The point of these plans is to encourage and empower consumer participation in health care decisions, making more economically and medically efficient choices regarding health care. The problem is that some folks are "gaming" the system by wrapping these plans with substantial first-dollar benefits, thereby defeating the purpose, and diluting the net gain.
Okay, let's try that in English, instead of insure-speak:
By choosing a high deductible, "no frills" health insurance plan, consumers (whether that's an employer group or folks on individual policies) enjoy lower premiums. That's because the insurer doesn't have to adjudicate a lot of small, routine claims and can thus save money on administrative costs. It also encourages consumers to make conscious decisions about health care, because they now have "skin in the game." These premium savings help the consumer more easily absorb the occasional catastrophic claim, because they've sent less money to the insurance company.
A classic "win-win" scenario.
Except when it isn't:
Apparently, a number of employer (or group) plans have been providing first dollar coverage to their covered employees. So that if, for example, the plan has a $1500 deductible, the employer is ponying up $500 or $1000 of that on the employees' behalf (or reimbursing them when claims are made). Thus, the employee has little or no incentive to make careful health care decisions, since the lower-cost high deductible plan ends up working pretty much like the high-cost co-pay plan it replaced.
If this sounds like an HRA (Health Reimbursement Arrangement), you're not far off.
Aetna finally figured out that a lot of their insured groups were doing just that, and using the savings to subsidize the higher out-of-pocket, thereby defeating whatever cost savings the plan might have engendered. And they're putting the kibosh on it:
"In recent months, Aetna has seen an increase in "underlying" or "wrap-around" plans that have not been disclosed prior to premium quoting.
We define an underlying or wrap around plan as any plan that either partially or completely subsidizes any member cost sharing outside of a federally-qualified Health Reimbursement Account (HRA) or Health Savings Account (HSA). Member cost sharing includes but is not limited to co-pays, deductibles and/or member coinsurance balances. (Employee funded Flexible Spending Accounts are not considered underlying plans) .*" [emphasis in original]
The offending employers have been kicking in 50% - or more! - of the underlying deductible, which has resulted in adverse selection, reduced health care savings, and increased "trend" (one factor in rate increases). This in turn has led to tainted risk pools and reduced end-user (consumer) savings, and presumably higher than expected rate increases at renewal time.
So what, you may ask, do they propose to do about this?
Going forward, they'll be requiring employers to "attest that no such underlying plans are present and that they are not funding the deductible in excess of 50% annually whether through an HRA or HSA." It's a separate form that must accompany all applicable new group applications. The form will essentially require the employer to promise not to pay more than 50% of the plan deductible. And this new rule has teeth: if the employer lies on that form and ends up subsidizing in excess of that 50% cap, it faces "rate increases, non-renewal, or termination."
Which, of course, begs the question: how would they know?
And that's a great question. I called Aetna this morning, and was told that, much like Blanche DuBois, they'll be relying on the employers' honesty. In other words, that they'll drop a dime on themselves. Uh-hunh.
While it would be easy to dismiss this out of hand, I must admit that I don't know how they'd track this, either. One would think that patterns could be seen in offending groups' claims, but perhaps that's not yet feasible. It's a shame, really, because it unfairly affects those groups who do choose to play by the rules.
In an email I received yesterday, Aetna says that it's finally had enough of agents and employers taking advantage of the low rates afforded to and by high deductible health plans. The point of these plans is to encourage and empower consumer participation in health care decisions, making more economically and medically efficient choices regarding health care. The problem is that some folks are "gaming" the system by wrapping these plans with substantial first-dollar benefits, thereby defeating the purpose, and diluting the net gain.
Okay, let's try that in English, instead of insure-speak:
By choosing a high deductible, "no frills" health insurance plan, consumers (whether that's an employer group or folks on individual policies) enjoy lower premiums. That's because the insurer doesn't have to adjudicate a lot of small, routine claims and can thus save money on administrative costs. It also encourages consumers to make conscious decisions about health care, because they now have "skin in the game." These premium savings help the consumer more easily absorb the occasional catastrophic claim, because they've sent less money to the insurance company.
A classic "win-win" scenario.
Except when it isn't:
Apparently, a number of employer (or group) plans have been providing first dollar coverage to their covered employees. So that if, for example, the plan has a $1500 deductible, the employer is ponying up $500 or $1000 of that on the employees' behalf (or reimbursing them when claims are made). Thus, the employee has little or no incentive to make careful health care decisions, since the lower-cost high deductible plan ends up working pretty much like the high-cost co-pay plan it replaced.
If this sounds like an HRA (Health Reimbursement Arrangement), you're not far off.
Aetna finally figured out that a lot of their insured groups were doing just that, and using the savings to subsidize the higher out-of-pocket, thereby defeating whatever cost savings the plan might have engendered. And they're putting the kibosh on it:
"In recent months, Aetna has seen an increase in "underlying" or "wrap-around" plans that have not been disclosed prior to premium quoting.
We define an underlying or wrap around plan as any plan that either partially or completely subsidizes any member cost sharing outside of a federally-qualified Health Reimbursement Account (HRA) or Health Savings Account (HSA). Member cost sharing includes but is not limited to co-pays, deductibles and/or member coinsurance balances. (Employee funded Flexible Spending Accounts are not considered underlying plans) .*" [emphasis in original]
The offending employers have been kicking in 50% - or more! - of the underlying deductible, which has resulted in adverse selection, reduced health care savings, and increased "trend" (one factor in rate increases). This in turn has led to tainted risk pools and reduced end-user (consumer) savings, and presumably higher than expected rate increases at renewal time.
So what, you may ask, do they propose to do about this?
Going forward, they'll be requiring employers to "attest that no such underlying plans are present and that they are not funding the deductible in excess of 50% annually whether through an HRA or HSA." It's a separate form that must accompany all applicable new group applications. The form will essentially require the employer to promise not to pay more than 50% of the plan deductible. And this new rule has teeth: if the employer lies on that form and ends up subsidizing in excess of that 50% cap, it faces "rate increases, non-renewal, or termination."
Which, of course, begs the question: how would they know?
And that's a great question. I called Aetna this morning, and was told that, much like Blanche DuBois, they'll be relying on the employers' honesty. In other words, that they'll drop a dime on themselves. Uh-hunh.
While it would be easy to dismiss this out of hand, I must admit that I don't know how they'd track this, either. One would think that patterns could be seen in offending groups' claims, but perhaps that's not yet feasible. It's a shame, really, because it unfairly affects those groups who do choose to play by the rules.
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