By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
ORLANDO, FLA.--The world of alternative risk transfer--the realm of captives, risk retention groups and self-funding--congregated this week in Orlando, Fla., an apropos location. Much like the peninsula and its annual hurricane threat, the ART community lives in regular dread of legislative and regulatory change. And the leaders of the ART world--much like hurricane forecasters--ring the alarm bells every year, none harder than this year perhaps.
The storm looming in the distance this year is, of course, national healthcare reform. Will ART leaders turn out to be prescient--and reform "makes landfall" this year and causes all the forecasted damage--or will those ART leaders continue to sound like the boy who cried wolf?
"Our industry is truly in jeopardy," said Armando Baez, president of the Self-Insurance Institute of America, at the ART trade and lobbying group's annual meeting.
As Michael Ferguson, chief operating officer of SIIA explained, the ART community has few friends on Capitol Hill. Democrats have been pushing a healthcare reform bill in the House (HR 3200, "America's Affordable Health Choices Act of 2009") that seeks to forestall, even punish, the self-funding of health benefits. Big-time-lobbying health insurers wouldn't mind if all the 70 million employees of self-funding bosses ended up on their books. Even some Republicans, those stalwarts of the free market and friends of businessmen big and small everywhere, do not favor the employer-based healthcare system.
"We have a lot of people out there who don't like us," Ferguson said.
The best possibility for self-funding employers and the vendors that service them--TPAs, PPOs, stop-loss insurers and the like--could be no healthcare "landfall" at all. In this case, healthcare reform would be stymied through the 2010 midterm elections. Then, as forecasted by Cliff Roberti, director of government relations for SIIA, the Republicans could win as many as 30 seats in the House and five seats in the Senate.
Roberti based his prediction on SIIA's analysis of 2010 congressional races as well as on a strong historic trend: since 1900, the president's party has lost seats in the first-term midterm election, with only three exceptions (Teddy Roosevelt in 1902, FDR in 1934 and George W. Bush in 2002).
Thus, the Democrats "small window of opportunity" to pass healthcare reform would close.
A not-too-terrible alternative would be for a watered-down version of Democratic Sen. Max Baucus' reforms to come out of the Senate Finance Committee. Say, if the final bill contains the cost-containment measures now on the table, which all private employers can appreciate, and sticks with co-ops instead of a government-run insurance plan. The administration of these co-ops, indeed, could provide new business opportunities for ART service providers.
That government-run insurance plan, on the other hand, if you listen to SIIA leaders and the grumblings of conference attendees, could be the equivalent of a Category-5 hurricane hitting Miami.
Not to be "overly dramatic," said Roberti, addressing an audience of SIIA members, but if healthcare reform take a partisan turn (meaning the passage of government-run insurance plans), a lot of people at the conference could be in another business in two years.
Even the "trigger" mechanism being advocated by Republican Sen. Olympia Snowe of Maine, whereby government plans would go into effect in certain regions where no competitive private marketplace exists, would be bad for the ART world.
It would kick off a domino effect, according to Ferguson. Where government plans became available, workers would migrate to them for the invariably cheaper prices. Providers would shift the costs to private employers, more so than they do now. Eventually, one or two large, high-profile employers in a given sector would cry uncle and stop providing benefits, and that would be all it would take for all their competitors to drop coverage too.
There is still room for optimism in the self-funded world, and nothing is set in stone. The Baucus bill is still a "moving target," said Ferguson, as the senator is in the process of trying to please as many people as possible.
Yet the worst case, like that major hurricane hitting South Florida, can happen.
"Even the paranoid can be right sometimes," Ferguson told Risk & Insurance® with a smile on his face.
September 25, 2009
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