Self-Insured Health Plans

Self-Insured Health Plans

“A self-insured health plan,” writes Dave Chase in The Opioid Crisis Wake-Up Call, “is established when an employer sets aside some of its funds to pay for employees’ medical expenses. Employees then contribute to the plan rather than pay traditional premiums.”

 

In the United States, it is not uncommon for large employers to chose to be self-insured rather than to offer health insurance provided directly through an insurance carrier such as Cigna or Anthem. Chase explains that self-insured plans shift risk from the insurance carrier to the employer, with the benefit of reduced administrative costs and changed financial incentives. Large carriers are often still contracted with in a self-insured system for some administration and bill paying functions. In a traditional relationship, as Chase explains, employees pay premiums and “if the premiums exceed the medical expenses, the carrier wins.” Self-insuring eliminates this aspect of health insurance, reducing the total amount that employees should need to contribute by eliminating a profit motive for the carrier.

 

Chase highlights another benefit of choosing to self-insure, lower taxes and fewer regulations to abide by. In the United States, each state has an insurance commission that sets its own standards and requirements for insurance (auto, home, medical, etc…). The benefit according to Chase is that, “the Employee Retirement Income Security Act of 1974 [ERISA] states that a private, self-insured health plan is administered in accordance with its [ERISA’s] terms and federal rules. So, these plans aren’t subject to conflicting state health insurance regulations or benefit mandates.”

 

This is an important point that I have been thinking about in Nevada. My state requires that health insurance cover ABA treatment for children with Autism until they turn 21. However, not all of the plans that Nevadan’s have through their employers actually cover ABA treatment and some only cover ABA treatment until a child is 7 years old. While selling insurance across state lines (as in buying an insurance plan sold in California and according to California statutes and regulations) is not legal, offering a plan from a self-insured employer based in another state is legal. Some employers in Nevada are very large, are self-insured, and have headquarters based outside the state. These plans are not subject to the changing health insurance demands of every state since they are regulated by ERISA. So many Nevadans, despite state law, do not have coverage for their child’s ABA therapy.

 

It is important to note that self-insuring can reduce costs for employers, give them more control over the plan they design for employees, and can offer tax advantages along with easier implementation by reducing regulations and applicable laws. Employers should move in this direction to create better health plans that give them better access to their own data and needs. At the same time, we should recognize that these types of plans can be hard to regulate and present challenges to patients, employees, and lawmakers who want to see specific changes or policies. Employers should strongly consider self-insuring to get away from the profit motive of health insurance carriers, but should recognize that avoiding individual state health insurance requirements by self-insuring could lead to a backlash against self-insured health plans.

Why the City-State is Returning to Prominence

I live in Nevada which is in an interesting state driven largely by two main metropolitan areas: Las Vegas in Southern Nevada and Reno in Northern Nevada. States today are relying on dynamic cities in order to get things done and to jump-start their economies. In my home state, Las Vegas in a tourism driven town that has remained an attractive hub for people looking to get away, have a chance to win some money, and to escape into a desert paradise. Reno has begun to reinvent itself by serving as an extension of San Francisco/San Jose tech companies who need more space and cheaper labor than is available in the Bay Area. Our state is in a sense two city-states that make decisions, interact with private companies, and coordinate citizens for economic growth and development. Government at the state level doesn’t forget our rural communities, but seems to often focus on what can be done to make sure Las Vegas and Reno can continue to grow and develop in the best way possible.

 

One reason why the city-state is becoming a powerful engine in the United States is that the Federal Government is pulling back from is role in making overarching national policy. Part of this is a result of deliberate choice as one political party attempts to reduce the overall impact, size, and function of the Federal Government. As Bruce Katz and Jeremy Nowak write in The New Localism, “The stated aspiration of the Trump administration to deconstruct the administrative state is ironically elevating the city-state as the locus of problem-solving activity.”

 

The authors write that the city-state has risen in an ironic result of the Trump administration’s actions because the nation’s most dynamic metropolitan regions generally seems to oppose the policies of the Trump administration. In the 2016 election most major metropolitan areas voted in favor of Hilary Clinton and Democrat candidates for other offices. Republican’s who felt left behind in rural areas generally favored Trump and Republican candidates and wanted a federal policy that did not leave their areas behind while focusing on the growth and expansion of dynamic cities. However, by abdicating decision-making responsibility, the Federal Government may be doing exactly that.

 

Decreasing the role of the Federal Government in effect gives cities the green light to take the lead on issues ranging from climate change to biomedical research and we see cities passing ordinances to reduce carbon emissions and encourage more spending and development in technological advancements (in Boston it is biomedical research and in Reno it is battery development). Cities can move fast and offer attractive amenities, tax breaks, and living environments for companies and organizations that want to change the world, a big contrast to the Federal Government that is characterized by gridlock.

 

When the Federal Government takes a hands-off approach, it is American cities, where people live and innovative cities are taking hold, that are able to engage in place-making to develop new structures and institutions. These cities work out the solution to the challenges and problems our country is facing, and then export those solutions from one metropolitan region to another. It is a city driven model of federalism which brings even more irony to the table. The Republican party has long been the advocate of federalism (at a state level) encouraging states to be able to adopt policies without interference of the Federal Government. In the past, these were often policies that maintained traditionalist values, as opposed to the new policies we see from states that address problems that the Republican Party would rather ignore. Federalism has shifted from states to the cities and is spreading in a new way as the Trump Administration creates confusion and incoherence at the Federal Level.