August, 2009:

Boeing Field, Seattle

Holy Moly! I never realized that there are so many employers out there that do not provide insurance. They self-insure, meaning that they do not provide their employees with health insurance from an insurance company. They hire a third party agent to administer the plans and the companies assume the risks. From Self-insurance: ‘An alternative financial arrangement’

When a company self-insures, the business can decide which services it will cover, make arrangements with doctors and hospitals to provide coverage at favorably negotiated rates, and design financial incentives, such as deductible and co-payment structures, that encourage wise use of health benefits.

How many do this? That is a hard one. After searching through Department of Labor and other websites with little success, this snippet from ebri.org is current as of 2006:

• Self-insured health plans—Overall, 45 percent of workers were covered by a fully insured health plan and 55 percent were covered by a self-insured health plan. Self-insurance has been growing over the years, but it remains much more prevalent in larger firms. In firms with 5,000 or more employees, 89 percent of workers were covered by self-insured arrangements in 2006, up from 62 percent in 1999.

If you work for a large company like The Boeing Co., it is a safe bet that the company, not a commercial insurance company, provides your coverage.

The article quoted below states that “some” operate their own health insurance plans, but from the info I found from the Washington State Department of Labor and Industries, there are probably more companies in Washington that self-insure than those that don’t. Employers that self-insure in Washington State include Microsoft Corp. and The Boeing Co.

via Employer Self-Insured Health Insurance Plan – What is it and is it good for me?.

Some large employers operate their own health insurance plan as opposed to purchasing coverage from an insurance company. Typically the large employer pays a third party (such as an insurance company or other administrator of health care claims) to administer the plan which they have designed for their employees – the large employer pays the costs (claims plus administration) directly out of the company’s coffer. While the large employer saves the profit margin that an insurance company builds into its premium, it raises the exposure of the large company to greater risk in the event that more claims than anticipated must be paid. Due to the nature of these plans (and tight regulation of such plans), most self-insured employer-sponsored plans are very efficient and provide good health insurance benefits to employees.

First of all, I want to address something in the quoted paragraph. The author states that, “While the large employer saves the profit margin that an insurance company builds into its premium, it raises the exposure of the large company to greater risk..”. Actually self-insurance raises the exposure of the company to the same risk as an insurance underwriter, not greater risk. The meaning here of “saves” is not very clear but I believe that the self-insured employer gets a premium from its employees that is comparable to what an insurance underwriter would charge and then pockets the profit margin, “saving” the profit margin. The cash flow from the premiums is less due to the comparatively small number of contributors, but the profit margin would be the same. The self-insured companies can also enact similar rules regarding pay-outs as an insurance underwriter and reap the same profits. I also challenge the statement that mentions “tight regulations of such plans” as if the self-insured corporations are somehow more regulated than any private insurance underwriter.

Secondly, each corporation contracts with a third party agency to administer the “insurance” program. These third party agents can and often do handle more than one large employer. For example, here in the Northwest an agency called Sedgwick Claims of Seattle administers the  insurance claims of both the Bed, Bath, and Beyond Inc. and the Behr Paint Corp.. Employees think they have typical insurance, and they do in a way, but the difference is that their employer pays their doctor bills, not an insurance company.

When healthcare reform is being considered, and ways to regulate out the bad practices are being word-smithed into a new law, the self-insured corporations must be included equally as any other insurance company. It started to bother me when I asked myself why corporations are intent on the status quo when they should be beating the drum in favor of a public option that would alleviate their insurance burdens freeing them to compete on a level field in the world market. Then it dawned on me why a company like, say, Behr Paint isn’t advertising for a public option. They are making the same extraordinary profits on their own insurance premiums that the insurance companies make.

They also make the same decisions about which doctor the employee sees and which services are, or are not, covered. The self-insured businesses, like Microsoft and Boeing, have total control over their employees health and their time away from the job. Considering the huge numbers of self-insured businesses, insurance reform debate of any kind must treat these corporations as insurance companies and impose the same regulations.

From Rreadingeagle.com, Reading, PA.(?) August 16, 2009

“The status quo is not acceptable,” [Scott R. Wolfe, president and chief executive of Reading Hospital] said. “There’s a lot of noise and a lot of churning going on right now, but I think the president should be lauded for putting this issue on the table, because the cost trends and lack-of-access trends that our current system has will continue to worsen.”

Wolfe said less focus should be placed on making sure that all major stakeholders – insurers, pharmaceutical firms, doctors, hospitals and patients – are in the room and more focus on the needs of patients.

“Otherwise we could design a system that looks good to many of us but still doesn’t feel good to the general public that uses our system,” Wolfe said.

Remember that when Mr. Wolf spoke of all major stakeholders, insurers also include the community’s businesses.

But how are these self-insured business regulated?

It turns out that individual states can’t regulate the health coverage that over half of the nation’s workforce obtains through self-insured plans. So the argument that there should be co-operatives available to market insurance plans that can operate across state lines is omitting the fact that over half of all employer provided insurance already operates across state lines uninhibited by state regulations. Self-insured businesses are regulated by ERISA.

From the Department of Labor:

Employee Retirement Income Security Act of 1974 — ERISA

• DOL Web Pages on This Topic

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.

There have been a number of amendments to ERISA, expanding the protections available to health benefit plan participants and beneficiaries. One important amendment, the Consolidated Omnibus Budget Reconciliation Act (COBRA), provides some workers and their families with the right to continue their health coverage for a limited time after certain events, such as the loss of a job. Another amendment to ERISA is the Health Insurance Portability and Accountability Act (HIPAA) which provides important new protections for working Americans and their families who have preexisting medical conditions or might otherwise suffer discrimination in health coverage based on factors that relate to an individual’s health. Other important amendments include the Newborns’ and Mothers’ Health Protection Act, the Mental Health Parity Act, and the Women’s Health and Cancer Rights Act.