Middle market employers gain control and transparency by transitioning to self-funding (SF) utilizing a group captive program. Control over the Plans offered; Transparency over all aspects of the what drives the renewal cost. Said another way, do away with arbitrary overhead charges, undisclosed costs and RX revenue to the fully insured (FI) carrier. The FI carrier unilaterally changes the Plan (not offered this year?) misstating the actual impact of the FI renewal. SF renewals are easier at open enrollment, employers can choose to leave the Plans in place. The conversation is the change in employee and member contribution. FI overhead is subject to Medical Loss Ratio (MLR). The 15-20% MLR ignores fees and rebates FI carriers add or receive that do not require disclosure. Increasing FI profitability year over year. Prior to passage of the Affordable Care Act (ACA), the SF transition conversation centered on removal of state mandated coverage and premium taxes. The conversation today expands to include ACA Health Insurance Taxes (HIT) and the gerrymandered MLR.
The ACA imposes an annual, non-deductible cost on insurance companies that offer FI plans and other providers of health coverage – the “HIT”. This ACA fee was intended to fund the state and federal ACA marketplace. The fee is based on an insurer’s share of the market, which is calculated based on each insurer’s net premiums for the year. The estimated applicable amount to be allocated between the FI market in 2020 exceeds $15,500,000,000. ACA requires the fee be paid in each calendar year after 2013. Legislation enacted in December 2015 suspended HIT collection for 2017. January 2018 legislation suspended the HIT collection for 2019. Unless Congress acts, the fee will go into effect for 2020. Even if congress acts shortly, can you expect your locked rates to be reduced by the FI market to offset removal of the HIT mandate?
The annual HIT fee is assessed and paid on a calendar-year basis, based on data from the prior year. Next year the HIT fee is due September 30, 2020, based on 2019 data. Only FI carriers and providers of similar coverage pay the HIT fee. FI carriers pass the HIT tax to employer group clients in the form of higher market premiums. The increased HIT amount will likely result in plan premium increases for 2020, adding roughly 3% to the overall premium costs. Plan sponsors should be aware this fee may be reflected in their 2020 FI premiums.
Middle market employers self-funding utilizing a group captive gain transparency and control while avoiding HIT, certain state premium taxes, some state coverage mandates, undisclosed RX rebates and the overall lack of transparency in the FI market.
Don McCully runs Medical Captive Underwriters LLC, www.medicalcaptive.com - Program management company using alternative risk transfer solutions lowering employer’s costs in both A&H and P&C insurance. Primary focus today is employee benefit advisors to lower medical spend and medical trend for employers enrolled in ClearCaptive. ClearCaptive is a 50 state open access, stop-loss captive solution for middle market employers with at least 50 enrolled employees.