OPINION: the behind-the-scenes battle that could subvert Obamacare

Complex state level battle over stop-loss coverage could eliminate crucial consumer protections

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I’ve written before about the tight relationships between health insurance companies and organizations that claim to represent the interests of small employers, specifically the U.S. Chamber of Commerce and the National Federation of Independent Business.

Those two groups have accepted hundreds of millions of dollars over the past two decades from the insurance industry in an effort to kill or weaken health reform initiatives designed to protect consumers, including those who work for small businesses.

The Chamber was the insurers’ organization of choice to derail Obamacare. During 2009 and 2010, America’s Health Insurance Plans —the major industry trade group— funneled more than $100 million of policyholders’ money to the Chamber’s anti-reform advertising campaign.

A decade ago, the NFIB did much of the insurers’ bidding. AHIP and a handful of big insurers bankrolled a front group called the Health Benefits Coalition to block a patients’ bill of rights that enjoyed bipartisan Congressional support. NFIB’s current president, Dan Danner—who was the group’s chief lobbyist at the time—was the Health Benefits Coalition’s lead spokesman.

More recently, the NFIB has been playing a similar role for yet another group that purports to represents small businesses, the Stop the HIT (health insurance tax) Coalition. Insurers are using that group as part of its campaign to get Congress to repeal an Obamacare provision that imposes a fee on some insurance policies. Revenue from the fee will help subsidize coverage for millions of low-income folks who are currently uninsured.

And now, insurers have turned once again to the Chamber, this time to wage a behind-the-scenes campaign aimed at state insurance commissioners. If they succeed, insurers will be able to sell a highly profitable insurance product to a highly targeted group of small employers—those with mostly young and healthy workers. By buying this product—stop-loss insurance—those small employers would be able to avoid using the planned state  insurance exchanges to obtain coverage for their workers.

Here’s why that’s important. Because of the way the Affordable Care Act is written, by avoiding the exchanges those small businesses would be exempt from having to comply with many of the most important consumer protections in the health law.

It’s complicated—so complicated that unless you are a reader of obscure insurance industry newsletters, you’ve probably never heard about this, even though it has the potential to cause the collapse of the exchanges and completely circumvent to intent of Congress. The intent of Congress was to make coverage more affordable and available to all of us, not just the young and healthy.

The key to this fight are those state insurance commissioners. Their organization, the National Association of Insurance Commissioners, just wrapped up its fall meeting in Washington, where consumer advocates were pitted against lobbyists for big insurers and their old friend, the Chamber of Commerce. The Chamber has taken the lead in pressuring the NAIC to make it easy for insurers to sell stop-loss coverage to small businesses wanting to avoid many of the ACA’s consumer protections. Those protections aren’t a small matter; they would, among other things, prohibit insurers from charging people higher premiums because of their gender, age and health status. Buying stop-loss coverage would also allow employers to largely side-step any regulation at the state level.

So what is stop-loss coverage? Most small businesses that offer coverage buy policies from insurers that assume the risk of paying medical claims when workers get sick or injured. If a small employer buys a stop-loss policy, the small employer theoretically assumes the risk, but only to a point. If a worker becomes seriously ill, the employer would pay a certain, previously negotiated amount; only after that would the stop-loss  insurer start paying.  

This would be an almost irresistible deal for small employers with mostly young, healthy male workers. And chances are the stop-loss insurer wouldn’t even consider selling the same policy to employers with young female and older male workers. So those employers would be the ones left to shop for coverage on the state exchanges. That’s crucial—but not only because the situation would treat different people differently; it’s also essential that the exchanges attract younger healthier people who get sick less in order to keep coverage for others affordable.

Leading the effort on behalf of insurers at NAIC meetings on this issue has been the Illinois Chamber of Commerce—not surprising when you look at its board, which includes WellPoint, UnitedHealthcare, Humana and Cigna, one of the biggest sellers of stop-loss insurance.

Consumer advocates won an early victory when an NAIC subcommittee this summer recommended that the organization update a 1995 Model Act that would help protect the integrity of the ACA by raising the threshold of insurance risk that an employer would have to assume before stop-loss coverage could kick in. In Washington last week, however, another NAIC committee, swayed by the Illinois Chamber and insurers, refused to go along, at least for now. It punted by asking yet another committee to gather more information.

While that was a setback for consumers, it at least gives advocates more time to make their case. Stay tuned for more. This crucial behind-the-scenes war is far from over.