By Matt Valeta, Health Policy Intern

Back in my elementary school days, my favorite activity during recess was playing four square. As long as everyone played by the same rules everyone had a great time. Once some joker started grabbing the ball and slammed it into your square there was going to be a problem.  Employer-sponsored health insurance is not much different.

The Affordable Care Act (ACA) comes with a lot of great new protections for consumers in the employer-sponsored health insurance market, which covers the majority (56%) of Americans. However, in order for these protections to work, everyone needs to play by the same rules.

Unfortunately, some employers are looking to self-insure in order to avoid having to provide insurance with the consumer protections in the ACA. Self-insured plans are plans where employers are responsible for the total health care costs of their employees.  These plans makes sense for large employers with large bank accounts. And they often have the best coverage, because large employers can negotiate better plans for their employees. But smaller businesses have found a way to self-insure as well – by purchasing stop-loss insurance. Stop-loss insurance only covers health costs after a dollar limit is reached, so employers pay out-of-pocket for their employees’ health care up to that limit. This allows them to buy cheaper, and lower quality insurance.

But employees covered by stop-loss insurance are not guaranteed to have the same health benefits covered if they had traditional insurance in the small group market in Colorado. For example, the ACA requires insurance plans to cover a package of 10 essential health benefits including emergency services, maternity and newborn care, pediatric services, and prescription drug among others. With stop-loss insurance, employers could limit what coverage they will pay for.

Perhaps the largest problem of stop-loss insurance is the threat is poses to the ACA’s state exchanges. Exchanges are the new marketplaces that will provide better quality and affordable private health coverage, starting in 2014.  Colorado is creating its own, known as the Colorado Health Benefits Exchange. These new exchanges need to enroll as many customers as possible in order to keep premiums low, what is known as risk-pooling. If too many business self-insure, including using these stop-loss plans, fewer employers will use the exchanges, and the costs will not be as low as possible for the exchange users. 

Coloradans deserve access to affordable health care when they need it. There are several options that Colorado could take in order to prevent stop-loss insurance from destroying Colorado’s health exchange.

In Colorado, employers can buy stop-loss insurance that only requires them to cover $15,000 per employee. This is called the minimum attachment point.  The National Association of Insurance Commissioners has recommended that the minimum attachment point be at least $60,000. Higher attachment points would increase the financial risk for insurers and persuade more employers to standard purchase health insurance. Another option is for Colorado to follow the example of North Carolina and require stop-loss insurance to be subject to the same regulations as regular insurance. This would help guarantee coverage of essential health benefits and take away the price discrepancy of stop-loss coverage. Finally, Colorado could outright ban the sale of stop-loss health insurance entirely like Delaware, New York, and Oregon. 

Consumers don’t deserve to be slammed by high health care premiums. If employers all have to play by the same rules in the insurance game than consumers across the board will see savings and access to the health care they deserve.

Read this article for more on Stop-Loss Insurance Issues.

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