This past year, the Missouri Chamber of Commerce unveiled it’s new association health plan designed for small businesses across the state to obtain affordable health insurance. Association plans have come into focus given recent federal attention and when designed appropriately can yield sustainable cost savings. The Missouri Chamber plan however, unfortunately misses its mark. We’ll dive into the most glaring issues and urge extreme caution to those exploring this product.
First, an association health plan on its face is a way for multiple, unaffiliated organizations to share in the risk for purposes of securing insurance. We typically see them tailored to specific industry segments such as schools, municipalities, restaurants, etc. but they don’t have to be. The Missouri Chamber is just one of the latest to prop up. No two association plans are identical and this post explores attributes unique to the Missouri Chamber plan.
Lack of Transparency
The Chamber plan is administered and insured by Anthem Blue Cross. In their contract is a provision forfeiting your rights (as plan sponsor) to your own claims data. See post: You Can’t Fix What you Dont’ See
The cost of health insurance is a direct reflection of the cost of healthcare services being consumed. It follows that if you spend less on healthcare you will spend less in insurance. But you’ll never know how much is being spent on healthcare. You’ll also never be able to independently audit the data to ensure that the payments by Anthem were accurate and fair (it’s been reported that as much as 80-90% of all hospital bills contain errors). It is your fiduciary responsibility to ensure that plan assets are being spent wisely, just like in your 401(k). Here you forfeit your right to the only leverage you have to produce real results.
Anthem Steals your Surplus
The MO Chamber plan is a max-funded, self-funded plan. Meaning you are paying at the maximum attachment point each month. This type of funding keeps your premium payment level (no fluctuations based on actual care usage) which can be beneficial from a budgeting perspective. There is no inherent problem with this except at the end of the year, if there is a surplus (i.e. you paid more in premium than was paid out in claims) you won’t get it back. Anthem keeps it. In a well structured self-funded plan, these are plan assets that belong to the plan sponsor (i.e. you the employer).
The Reserve Fund
Association plans in Missouri have reserve requirements. This is to ensure that money is available in order to pay claims. It’s similar to banking reserve requirements. The question is where did the funds come from? The answer: Your broker paid it. Anthem selected about a dozen brokers to market and sell this program. Those same brokers put out the funds to establish the reserve fund. How do brokers of this plan get paid? By Anthem, in the form of commissions and bonuses. We called a handful of the brokers to inquire about the program and none disclosed their commissions, bonus payments, nor the fact that they funded the claims reserve. If this isn’t a conflict of interest, I’m not sure what is.
We know that the only path to spending less on health insurance is to spend less on healthcare. This doesn’t mean removing coverage. Quite the contrary, it means utilizing MRIs for $300 at imaging centers versus $3500 at the hospital or getting lab work done for a few dollars versus a few hundred dollars. It means avoiding unnecessary care and giving employees the tools to be engaged healthcare consumers. When the data is hidden, you have no choice but to hope that the insurance company is managing your money appropriately.