Why opening state health plan can’t work
To the editor:
I read with interest Bob Sanders’ article concerning N.H. Rep. Jill Schaefer Hammond House Bill 617 (“Bill would open state health to businesses,” 2/13-2/26 NHBR). While I applaud her efforts, I think there may be some items within federal insurance law which may prove insurmountable.
One of the tenets of insurance law is that there be an insurable interest between the insuring parties. That situation is created by the interest an employer has to attract and retain employees through employee benefits plans, such as a health-care plan, a retirement plan or a life insurance plan.
The key element here is that there is an employer/employee relationship. Rep. Schaefer Hammond’s bill does not create this relationship, it merely allows an organization to buy into the state’s plan. While it makes sense that a state representative can join the state’s employee benefit plan because they are technically employees of the state, there is no reason the state can claim the relationship, and therefore provide the coverage without specific legislation. There is also an adverse selection danger here which is not beneficial to the plan financially.
Second, and more importantly, the state benefit plan is a large-group self-insured plan. In order to legally allow non-related entities to join the same benefit program, the plan must be changed to a Multiple Employer Welfare Association, or MEWA. By definition, all MEWAs are fully insured, based upon the small group underwriting platform and administered by a third party organization that is already in existence, and not specifically created to establish the insurance program.
In this case, the state cannot administer its own plan, it would have to fully fund the medical claim reserves, which is a tremendous financial burden, and change its rich negotiated benefit plan to the more rigid small group plans. I am not sure the labor unions would agree to this.
The only way to get this done is by federal action. It cannot be done by state legislation alone. I do not see the federal government moving in this direction anytime soon.