This week Governor Bill Haslam of Tennessee signaled his intention to not set up a state-operated health insurance exchange in Tennessee. The Knoxville News Sentinel quoted the pro-business Governor as saying “If you take the politics out of the decision, what you’re left with is this: As the CEO of the state of Tennessee, I’m being asked to make a significant business decision based on information that’s only now dribbling out of Washington and that we appear to have little influence over.” Haslam also noted that the state has received over 800 pages of proposed rules for health insurance exchanges in the last month.
To read the entire Knoxville News Sentinel article Click Here.
The Governor was required to make his intentions known to federal officials by Friday. He did so in a letter sent Monday to Secretary of Health and Human Services Kathleen Sebelius. The Governor’s letter stated that ”There would be significant risk involved with taking on an exchange while your department is still developing the rules of the game or if the federal government is ultimately going to control the most important levers.” Echoing the Governor’s letter, Tennessee Lt. Governor Ron Ramsey stated, “It would be dereliction of our duty as public servants to take on as a partner a federal government that is clearly out of its depth.”
State exchanges are supposed to serve as clearing houses for citizens to purchase insurance mandated by the federal Affordable Care Act (also known as Obama-Care). The federal government is on the hook to set up exchanges in states that opt out of setting up state exchanges. Tennessee becomes the 18th state to refuse to set-up a state exchange, while seventeen states have announced their intention to set-up state exchanges.
2 Points to Ponder
There are two points to ponder in light of the Governor’s refusal to set up a state health care exchange.
- Obama-Care mandates a massive increase in health care coverage (both in numbers of insured and range of benefits required) across the U.S. with NO mechanisms or mandates in place to control cost.
- Related to number one above, Obama-Care creates tremendous uncertainty. Let’s face it, Governor Haslam is a businessman. He joins ranks with 18 state governors and businessmen and businesswomen across the nation who are uncertain about the impact that Obama-Care will have on costs for their states and their businesses. For businesses uncertainty is unsettling.
Is There a Way to Address The Uncertainty Created by Obama-Care?
An approach to avoid the uncertainty, inflexibility and additional costs imposed upon employers by Obama Care is to use self-insurance arrangements. Companies that self-insure their health care plan will be allowed much greater flexibility in plan design. Group health plans in 2014 will tend to be uniform and offer more benefits than large applicable employers currently offer. Greater flexibility for companies that self-insure will enable them to offer “Major Medical” or custom craft their own health insurance and health benefits plans to provide meaningful but affordable coverage to their employees.
Also, small employers that self-insure are exempted from the “Essential Benefits” requirement of Obama Care because the “Essential Benefit” rules apply to all small group health plans only.
Informally self-insuring health benefits can be inefficient and risky. However, formally self- insuring health benefits through a captive insurance company reduces (or in some cases eliminates) the downside of self-insuring health care benefits.
What is a captive insurance company?
A captive is simply an insurance company with the same or related ownership as the primary companies it insures. Formally self-insuring health insurance risk through a captive insurance company can provide these benefits:
- Flexibility in health care plan design.
- Elimination of the requirement to book a liability on the employer’s books to account for expected health care claims.
- Establishment of reserves or a sinking fund that lessens the cost of stop-loss coverage in the future.
- Avoidance of state imposed premium taxes.
- The possibility of realizing substantial profits that currently accrue to the benefit of third party insurers.
The bulk of the requirements Obama-Care will place on businesses occur in 2014. Classification and other regulations will be based on the structure of the business and its health plan in 2013. To prepare for 2014, businesses need to adopt the optimal structure in 2013 or else face potential added regulation in 2014.
Contact our office if you’d like us to analyze how a captive insurance company might help you manage the uncertainty and costs of Obama Care.
Phone – 865- 386-4920
E-Mail – Tom@CICServicesLLC.com
Web – www.CICServicesLLC.com