New Approach to Group Health Insurance

Comparing MEC Plus Plans – Beyond Spread Sheeting

In comparing (see attached Exhibit) the leading MEC plus (a.k.a. Skinny Options) there are factors that go beyond the premium price and the value of the benefits shown. Here are the additional (below the waterline) criteria that I apply in evaluating these types of programs:

  • Carrier – Is the proposal generated by the insurance company or an aggregator affiliated with the carrier? Whenever possible, I want a plan that is marketed and supported by the insurance company directly, rather than through 3rd party?
  • Experience – What, if any personal experience have I had working directly with the carrier?
  • Administration – Are all of the components of administration (customer service, claims, underwriting, compliance and billing) located in the same place with one point of contact, or are they spread out among several different organizations (TPA or marketing company) in different locations with different points of contact.?
  • Implementation – Does the plan offer tools for enrollment, live on site enrollers, how effective are there marketing materials and what percentage of employees opt in (important in MEC, as we want fewer employees enrolling in a subsidized exchange)?
  • Renewal History – Historically has this plan experienced rate increases, or have they accurately underwritten the case. Also, do employers participate in any surpluses in the MEC plan?
  • Compliance – Are there any issues with compliance with the Affordable Care Act, state requirements and percentage of employees choosing subsidized exchange covered.

New Approach in Evaluating Group Health Insurance

As you can see, our evaluation process goes well beyond simply comparing the spreadsheet of rates and benefits. In 2017, brokers must have the courage to approach their clients with an open mind and willingness to suggest out-of-the-box solutions., After taking into account all of the criteria listed above and applying what we know of the changes in the, legal and regulatory environment we find ourselves operating under, the following strategy begins to make a lot of sense, at least it is worth the effort to present as an alternative to the traditional timeworn recommendations of the past.

  1. A strong argument could be made (given the absence of pre-existing condition limitations and the availability of major medical on demand) for replacing major medical plans (often with deductibles in excess of $5000) with a dual option (MEC plus low and high option indemnity coverage) along with a voluntary (or employer sponsored) Critical Illness option ($20,000-$25,000 guaranteed issue).
  2. Employers should offer to pay 100% of the premium costs for basic MEC plus option ($90-$100 range), which would accomplish compliance with both the employer mandate (4980H(a) as well as the individual mandate requirement applied to the employees. (Note: This option does not provide compliance with the Minimum Value requirement, this is by design)
  3. Critical Illness benefits are important as they provide a safety net for any employees who are diagnosed with dread disease. This coverage benefit will provide a necessary interim benefit to bridge the gap while the affected employee (or family member) acquires more substantial major medical coverage on a guaranteed issue basis.
  4. Employers could justify paying 100% of the cost of the basic plan ($90-$100 pepm for the hourly workers, while increasing contributions to cover 100% of the cost of the buy up option ($250 range pepm) for management and executive employees as this is still considered to be legal under section 105H.

Although there is a small, but acceptable amount of risk involved in replacing a major medical plan with a limited medical plan, the absence of pre-existing condition limits and a substantial cash settlement under the critical illness coverage, makes it much less risky than in the past.

In conclusion: today’s group health insurance market has irrevocably changed and turned upside down. No longer do we need to design plans for the 2% highest risk employees, the elimination of barriers to coverage (pre-existing conditions) along with the increase in deductibles (all but eliminating low income employees access to basic care) have combined to create an environment that forces dramatically different approaches to employee benefit strategies. We believe group health insurance must change with the times and focus on supporting the needs of the 98%, after all, it is still GROUP coverage. First dollar benefits (for the low-wage worker) and a robust Critical Illness safety net (for employees with assets to protect) can now be realistically considered and adopted, particularly for those employers in the service sector’s (food, hospitality, agriculture, nursing and home health care).

Today, our general agency operates successfully in the space and will be more than happy to assist you and your clients in evaluating different and out-of-the-box scenarios like what I describe above. We look forward to hearing from you, both with your challenges and your suggestions.

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