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Another Voice: State legislators should undo new self-insurance limit

By Mike Ferguson

New York lawmakers are making life harder for many of the state’s businesses and labor unions.

This summer, Albany’s finest had the chance to preserve medium-sized firms’ and unions’ ability to “self-insure,” whereby they forego conventional health insurance and pay their workers’ medical bills directly. The strategy has enabled thousands of groups to provide high-quality, affordable benefits.

Instead, state legislators capitulated to pressure from conventional health insurers and approved a measure that will bar medium-sized businesses and unions from self-insuring. 

State leaders must reverse their cronyistic ways and restore these medium-sized organizations’ right to choose how they provide health benefits.

Empire State businesses and labor unions have long used self-insurance to pay for workers’ health care. If an employee or family member goes for a checkup, the company itself, not an insurer, pays the doctor’s bill.

To protect themselves from a catastrophically high claim, small and medium-sized employers often purchase “stop-loss” insurance. These policies reimburse employers if claims exceed an agreed-upon threshold. By cutting out the insurance company middleman, self-insurance can reduce health costs by up to 12 percent.

Statewide, some 1,700 firms and labor unions with between 51 and 100 employees or members use self-insurance to cover almost 130,000 workers.

Currently, state law forbids “small businesses” – those with fewer than 50 employees – from purchasing stop-loss insurance. In 2016, however, the definition of “small business” will expand to ensnare groups with between 51 and 100 workers. Absent legislative action, hundreds of self-funded businesses and labor unions will lose access to stop-loss insurance.

Last session, the State Legislature considered bills that would have permitted groups with 51 to 100 workers to continue purchasing stop-loss policies.

Unfortunately, legislators settled on a “compromise” that allows only groups with 51 to 100 workers already covered by self-funded plans to buy stop-loss insurance – and only for another two years.

Lawmakers were unable to stand up to two of Albany’s most powerful interest groups: dominant insurance carriers and key gubernatorial appointees.

The insurers sensed an opportunity to gain thousands of customers and millions of dollars in revenue. The governor’s allies, meanwhile, were hoping to shore up the state insurance exchange by forcing self-insured New Yorkers into the government-run marketplace.

Legislators will soon have the chance to fix their mistake and restore medium-sized firms’ and unions’ ability to self-insure. They should seize it.

Mike Ferguson is the president and CEO of the Self-Insurance Institute of America.