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‘Self-insured’ businesses resist new health rules

More than 70 million Americans who have health insurance through their jobs could be open to higher costs or denials of coverage under a leading plan making its way through Congress.
Health Overhaul Shielding Employers
Senate Finance Committee member Sen. Jay Rockefeller, D-W.Va., holds up a report about underpayment to consumers during the markup of health care legislation on Capitol Hill in Washington on Sept. 29. Susan Walsh / AP
/ Source: The Associated Press

Despite promises by President Barack Obama, more than 70 million Americans who have health insurance through their jobs could be open to higher costs or denials of some coverage under a leading overhaul plan making its way through Congress.

That's because large employers that directly assume the cost and risk of health coverage for their workers — including Wal-Mart Stores, Inc., Caterpillar Inc. and Xerox — wouldn't be subject to the same rules and restrictions that would be imposed on health insurers in the measure approved this month by the Senate Finance Committee.

Large companies that offer their workers such coverage are lobbying hard to keep the status quo and be shielded from costly new regulations and requirements in the final health measure currently being negotiated behind closed doors by Obama's top aides and leading Democrats.

Not all Democrats want to go along.

"I want to make very clear that we cannot promise the American people that the insurance reforms they have been hearing so much about will benefit everyone, when the reality is that this bill leaves out" up to 55 percent, or 73 million people covered by such arrangements, said Sen. Jay Rockefeller, D-W. Va., when the Finance panel met recently to debate the measure. He tried unsuccessfully to change the legislation to require those plans to obey all rules applying to insurers.

Many workers not protected
What the firms want is to be able to keep extending health insurance to their workers free of many insurance regulations, such as those governing what services must be covered by a policy and when a person can be denied coverage.

That means that despite Obama's pledges that people will no longer be subject to the most egregious aspects of today's health care system — being denied insurance because of a health condition, shouldering crippling out-of-pocket costs, or facing limits or high costs for basic services and treatments — a wide swath of workers wouldn't enjoy the same guarantees.

Several big business groups have banded together as the National Coalition on Benefits to preserve their special status, originally granted in the early 1970s for employers that take on the risks and costs associated with insuring their own workers. They've been bringing executives from companies large and small to Capitol Hill for meetings with lawmakers to drive home their slogan: "Don't erode what works to fix what's broken."

The companies say they need flexibility to continue covering workers, and provisions included in other drafts of the health overhaul that would eventually subject them to some of the same rules as insurance companies — like requiring them to offer specific benefits — would crush their ability to do so.

"The more the administrative burdens are, the more costly it becomes. These things tend to snowball and grow with time," said Martin Reiser, a lobbyist with Xerox who heads the coalition. "Our message is that the employment-based system is working, so don't try and fix us."

Wal-Mart is part of the group. So is Caterpillar, which is a member of the steering committee along with such other Fortune 100 firms as AT&T, Dow Chemical and Verizon Communications.

Businesses that ‘self-insure’
At issue are businesses that "self-insure" rather than purchasing coverage from an insurance company. Workers in such arrangements often believe they're covered by a health insurer since they have cards bearing the company's name, but in fact their employer shoulders the risks and pays claims, with the insurance company merely administering the plan.

It's a growth business for many insurers; two-thirds of Aetna's 20 million members are self-insured, its chief executive said in a recent cable TV interview.

The Associated Press is one of the vast majority of large employers that self-insures.

Firms that offer the coverage generally provide generous benefits, and they're already subject to some federal requirements. They must cover maternity care, mental health and breast cancer screening, for example, and can block someone from coverage because of a pre-existing health condition only under certain circumstances and for limited periods of time. While they're not legally required to cover everyone regardless of medical history or health status, most if not all of these employer-provided plans already do so, since their goal is to spread risk across a broad group.

Still, some lawmakers contend they should have to abide by the same strict requirements that health insurance companies would under the new system.

Rockefeller says he is worried that some "bad actors" looking to manage their costs would end up saddling their workers with more health expenses. For example, if a worker had cancer and reached his employer's coverage limit, the company could stop paying for treatment. Insurance companies, by contrast, would be barred from establishing such limits in the new system.

‘They can do whatever they want’
Employers already have been shifting more health care costs onto workers in recent years as those expenses have skyrocketed. In the current sluggish economic environment with unemployment high, some analysts expect the trend to intensify.

"An employer's ability to increase deductibles and copays and basically mess around with a source of compensation depends on the strength of the labor market," said Paul Fronstin of the Employee Benefits Research Institute. "Right now, employers have it made, because unemployment is at 10 percent — they can do whatever they want."

If companies in this category get their way in the debate over the health overhaul, employees will remain subject to such changes and reductions.

"They're already vulnerable in the sense that employers decide what to cover in the benefits plan, and should somebody want something covered that's not covered, there's basically no recourse. That won't change," Fronstin said.

Organizations representing the large employers — including the Business Roundtable, the National Association of Manufacturers and the American Benefits Council — say their members aren't asking for special treatment.

"We're the group that's been doing the right thing year after year. If the end goal is to make sure that everyone has good insurance, we're the group that's doing that already," said Jeri Kubicki of the NAM.

The Self-Insurance Institute of America Inc., which represents smaller firms that provide coverage to their workers, wrote to Senate Majority Leader Harry Reid this week arguing that its members' plans should be left alone in the push to expand coverage.

Doing otherwise, wrote Mike Ferguson, the group's chief, would "at best result in higher costs and reduced benefits for beneficiaries and at worst force employer-sponsors to terminate their plans altogether."

Ferguson's group has poured more than $600,000 into lobbying Congress over the past two years, doubling its spending this year as it has intensified its push to resist new requirements. Large members of the National Coalition on Benefits have shelled out much more to influence Capitol Hill, including more than $20 million by the Business Roundtable, more than $9.5 million by the National Association of Manufacturers and $1.6 million by the American Benefits Council.