The information in this article is current as of March 25, 2020. As the situation evolves, we will be able to better project the overall impact to employers’ healthcare costs related to COVID-19. We acknowledge that the facts will change and invite you to revisit this page later for the most up-to-date information.
An organization’s decision to self-fund their medical claims exposure requires a high level of contractual and financial acumen even during the most predictable economic environment. More flexible and complex than fully insured contracts, self-funded plan sponsors understand that provisions they establish around plan coverage, member eligibility and policy exclusions, must match the underlying stop-loss policy to ensure accurate and manageable claim exposure. In addition, while insurers may occasionally make mid-year plan coverage adjustments automatic in their fully- insured block, self-funded programs often need an extra level of evaluation before accepting such changes to their program. This is especially true of stop-loss coverage if handled by a different entity than the underlying carrier administrator. During the COVID-19 pandemic, this attention to program detail is paramount.
Over the past several weeks, insurance carriers have relaxed eligibility definitions, federal and state governments have requested or required member cost-sharing waivers for COVID-19 related testing, and all entities are signaling flexibility in premium payments and enrollment adjustments. While it may seem appropriate, prudent and even required to enact these changes during this time, self-funded plans have additional considerations and steps required to enact the changes. Not all of these consumer-friendly allowances are automatic or allowable under self-funded programs. Any changes to plan administration must always be approved under the stop-loss contract.
Gallagher’s Medical Stop-Loss Unit, part of the Healthcare Analytics Consulting Practice, is developing a comprehensive set of COVID-19 related resources specific to self-funded programs, designed to help our clients confidently navigate this rapidly changing landscape. In addition, every carrier is approaching these key issues slightly differently when not government mandated. Gallagher is clarifying and tracking all of these change options and reviewing contracts across our entire client base to help advise our clients on how to better support employee and organizational wellbeing. Below is a highlight of some of the key issues.
Coverage and Exclusions of COVID-19 Related Claims
Currently, Washington is keenly focused on the “pandemic exclusion” wording standard in corporate businesses interruption contracts. Businesses that have been forced to close or have seen a loss in revenue in the past several weeks are quickly realizing that all business interruption policies include an exclusion for pandemics. Insurers argue that the reimbursements would be in the trillions of dollars, dwarfing the losses after 9/11 and threatening the solvency of their industry.
In response to COVID-19 being officially categorized as a pandemic, Gallagher’s Medical Stop-Loss Unit immediately engaged in a comprehensive medical and stop-loss carrier request for information (RFI) to address potential coverage and exclusions issues. Thankfully, on the employee benefits side, the pandemic coverage exclusion wording is rare in most stop-loss contracts. However, some medical carriers have filed plans in several states (fully insured) allowing for pandemic and catastrophic event exclusion wording. In other filings, a pandemic classification may automatically relax standard precertification requirements, early pharmacy refill limits and other cost and utilization control measures. Each administrative services only (ASO) and stop-loss contract should be reviewed in light of these issues. In response, Gallagher’s Medical Stop-Loss Unit has been carefully reviewing all client contracts to ensure no such wording is placed in these contracts.
It is also important to note that most contracts specifically exclude experimental and clinical trials. As the development of new potential treatments arise, there may be new methods, drugs or protocols that may or may not be clearly defined in the current plan documents. Gallagher will assist our clients in reviewing coverage impacts and considerations as new treatment protocols are introduced and start to take shape. At this time, we are not aware of any known COVID-19 related treatments falling into this category, but the situation is being monitored by our Healthcare Analytics Consulting practice.
Plan Design Changes Off Anniversary
At this time, most carriers have chosen to, or have been required to, waive all member share expenses related to COVID-19 testing for patients. This waiver typically includes deductibles, copays and coinsurance. Several vendors have recently taken it a step further to extend that waiver to inpatient cost share as well, stating that no medical “surprise billing” will be the member’s responsibility.
For the carriers implementing these changes, it is automatically adjusted across their fully insured block of business with no short-term adjustments to the rates. What is unknown at this time is if, and how, it may impact renewals as carriers are unsure of the severity of the claims over time. For self-funded plans, Gallagher is encouraging plan sponsors to waive member copays for COVID-19 testing and have queried the stop-loss carriers to apply the expense toward specific and aggregate claims accumulation. Some carriers have automatically adjusted self-funded plan adjudication and plan sponsors have 10 days to opt out of the waiver. Others must be notified of the sponsor’s intent to waive member expenses. In any event, the stop-loss carrier should be notified of all such plan design changes as soon as possible.
In an earlier article, Gallagher’s Healthcare Analytics team analyzed the expected increase in plan costs and found it negligible, as well as a key to incent members to seek early testing. As it is early in most plan years, members may still have significant out-of-pocket exposure and could ignore or delay testing early in the illness cycle. At this time, Gallagher is recommending plans trigger the member cost waiver, at least for testing.
Changes in Eligibility: Staff Reductions and Relaxed Open Enrollment
Unfortunately, due to the unprecedented level of work stoppage in the United States, many organizations are currently contemplating or have instituted some type of reduction in workforce. Depending on how the affected staff is categorized and the intent of the employer to continue subsidizing medical premiums or recall workers once the restrictions are lifted, carriers are providing a high level of flexibility in allowing employees and their families to remain on the plan.
With furloughed workers or workers who currently fall below the minimum hourly eligibility requirements for coverage, carriers are specifically allowing plan sponsors to self-determine whether those employees may continue on the active group health plan. It is critical to note, however, that execution of this leniency must be applied consistently across the organization, not handled arbitrarily based on individual circumstances, and contributions must be at least as generous as when they were in “active” eligible status. The plan’s premiums must also be paid up to date in full. It is also critical to note that some carriers are requiring a notification within strict time parameters of those individuals falling into this new class. When those employees are returned to active eligible status, the carriers are also requiring notification.
Off Anniversary Carrier Re-Rating
Most stop-loss contracts reserve the right to re-rate premiums if there is a significant shift (typically between 10% and 25%) of active covered lives during a plan year. Gallagher has queried the market and requested that during this time carriers do not exercise that provision to re-rate the plan. Carriers will most likely handle this on a case-by-case basis. Even without carrier rate actions, significant reductions in population for a self-funded program could render the levels of coverage in specific and aggregate protection inappropriate for the new risk profile. All clients should seek guidance from their benefits consultant to assist in options of restructuring the program before a significant staffing change is made.
New Open Enrollment Periods
Carriers have also signaled a willingness to offer significant flexibility in allowing individuals who have waived coverage to rejoin their company’s benefits plan even without the traditional open enrollment triggers taking place. Many spouses are currently losing coverage and the carriers want to provide an opportunity for those individuals to join another plan with minimal complexity of verification. As with other provisions, the plan sponsor must be transparent in these transactions, and the plan administrator and stop-loss carrier must be notified in writing.
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This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
© 2020 Arthur J. Gallagher & Co.