Bill would let small businesses, trade groups set up self-funded health plans

Some lawmakers hope to allow family farmers, small farm-related businesses, and others to band together for more affordable health coverage. The move could help hundreds of thousands of North Carolinians.

The Senate Health Care Committee debated House Bill 933 Thursday, June 7, but didn’t vote on it. Committee Co-Chairman Sen. Ralph Hise, R-Mitchell, said the rewritten bill allows small businesses to take advantage of heftier buying power and get association health insurance plans — self-funded plans not regulated as tightly as those restricted by state mandates and the Affordable Care Act — cheaper than they could get individually, starting in 2020.  

Businesses that dropped employee health insurance because it cost too much could qualify for tax benefits and start covering employees again. Consumers hit by large premium increases not offset by ACA subsidies would gain options and flexibility.

Nonprofits or large trade associations operating at least 10 years would have to sponsor association health plans. The legislation also expands the number of businesses that could create more affordable, self-funded health insurance plans to compete with costlier ACA-compliant plans offered on the individual health insurance market.

Many large groups, including the State Health Plan, are self-funded. But state regulations require a business to have at least 26 employees to self-fund. H.B. 933 lowers that floor to 10. Companies would determine how much coverage and benefits to offer and assume all the risk for employee health-care claims.  

Reactions from the N.C. Department of Insurance were mixed.

“We’re not opposed to the provision in the bill making it easier for smaller business to self-fund health benefits,” department spokesman Barry Smith said in response to a query from Carolina Journal.

“As far as the health association provision, we think this needs more study, and should be discussed in the 2019 long session,” Smith said.

“We sat down and talked with the department about this issue. We’ve discussed their concerns,” Paul Sherman, an N.C. Farm Bureau lobbyist, told Carolina Journal Friday.

“We’re asking the state to trust that organizations such as ours can provide these benefits, and do it respectfully without the regulation of the state,” Sherman said.

The Department of Insurance has no regulatory authority over self-funded, large group plans, such as the association health plan Farm Bureau contemplates, he said. That proposal meets all state and federal laws..

North Carolina has 519,803 people enrolled in the federally facilitated health exchange, reports the federal Centers for Medicare and Medicaid Services. Enrollment is down 5.35 percent from 2017.

As premiums have escalated, enrollment has plummeted, reports the U.S. Department of Health and Human Services. In 2014, 90 percent of people eligible for subsidies bought plans from the exchange; by 2017, that share had dropped to 65 percent.

Sherman said a few hundred thousand people potentially could transition from exchange plans to less expensive association health plans or self-funded policies.

During legislative debate June 7, Larry Wooten, N.C. Farm Bureau president, said North Carolina consumers are clamoring for relief. “[The] extremely high cost of health insurance and the affordability of that product is first and foremost on their mind.”

Association health plans operate successfully in other states, notably Tennessee and Iowa. Farm Bureau wants the same approach here to insure its 800 independent bureau members and other small business workers.

Sens. Gladys Robinson, D-Guilford, and Tommy Tucker, R-Union, asked Wooten if the new plans would lure healthy people to drop coverage under the ACA. Their premiums subsidize the cost of covering older and sicker people on the ACA plans.

“It would not be for everybody,” Wooten said. Farm Bureau may offer tiered layers of coverage and hasn’t decided how comprehensive its plan would be. For instance, it may not cover pre-existing conditions.

“If you look at underwriting, some folks might still be better off in the individual market in the ACA,” Wooten said.

But those who don’t qualify for ACA subsidies or are too young to receive Medicare might prefer the new plans. Those whose insurance was canceled despite President Obama’s now infamous pledge they could keep their plans and doctors also could benefit. They are struggling as insurance rates surge, Wooten said.

Farm Bureau is hearing “horror story after horror story about … a percentage of our population that are out there suffering, and they are suffering greatly in terms of the need for health insurance at an affordable, reasonable cost,” Wooten said.

N.C. Association of Realtors lobbyist Cady Thomas told lawmakers affordable health insurance “is the No. 1 need of our members,” whose average age is 54. “Their costs under the ACA, because they are independent contractors, have gone up every year very dramatically. They’re in desperate need of something because right now they are not insured at all.”

North Carolina’s neighboring states allow small employers to provide self-funded insurance plans, Aetna lobbyist Joe Winn said. Some states allow one- or two-employee businesses to self-fund.

“This doesn’t take away from the Affordable Care Act,” Winn said. But it’s necessary because “federal reform has failed to materialize in a meaningful way.”

Indeed, some health-care analysts have told CJ states should lead on health insurance reform because action in Congress has stalled.