Current state of the fully insured private plan exemption

On September 17th, a hearing was held at the Massachusetts Division of Insurance (“MDI”) on the status of the development of a PFML insurance policy.  The hearing was attended by an official from the MDI, the Department of PFML (“DPFML”), over 40 insurance carriers and a representative from the March & McLennan Agency. 

Here is what we know…

1. There are no approved policies from any insurance carriers.  The MDI has yet to create a template for carriers to use to create their own PFML policies. Since there are no approved policies, there are no approved insurance rates for the policies.
2. The MDI stated that they anticipate it will be late October (at the earliest) before a template is ready for a carrier to use to draft insurance policies. As of today, the MDI has not decided what the content should be. The MDI emphasized that they will have a DISCLOSURES section prominently featured.
3. In order to allow employers to apply for a private plan fully insured exemption, the MDI has created a Declaration of Insurance (“DOI”). In laymen’s terms, a DOI is like an IOU…a promise that the employer will get insurance and a promise that the carrier will deliver a fully approved final insurance policy to the employer as soon as possible.
4. The MDI issued Notice 2019-1 to the insurance carrier community which provides guidance on the DOI process as well as a sample DOI.
5. After a DOI is completed by an employer, it will be sent to the MDI for review and approval. After that DOI has finished its work, the client can upload the DOI with its application for a fully insured exemption. If the exemption is granted, the employer will later have to upload the final approved insurance policy.
6. If an employer has already been approved for a private plan fully insured exemption, they are going to have to supplement their filing with a DOI.
7. On September 18, 2019, the MDI dedicated its first staff training on how to review and approve/reject a DOI.
8. It is possible for an employer to obtain a DOI, receive at a later date a fully insured policy, and pay no premium at all until 1-1-21 but it carries some risk. The savings of not having to pay premium could be substantial. But…again…it is not risk free.

Dumping and Disclosures

1. The MDI, DPFML and insurance carrier community have been discussing the practice of “dumping.” This was also discussed at the September 19th hearing attended by Marsh & McLennan Agency.
2. Dumping occurs when an employer, who is approved for a DOI, later dumps coverage shortly before 1-1-21 or after 1-1-21, and joins the state program.  The consequence of dumping is that the state program is forced to absorb employees for whom it has not received any contribution dollars.
3. DPFML and MDI officials stated that if an employer, with a DOI, cancels its insurance coverage shortly before 1-1-21 and dumps its employees into the state program, it will be penalized 15 months of total employer/employee contributions.
4. DPFML and MDI officials also said that they were working on an appropriate penalty structure for the situation where, after 1-1-21, and after an employer pays premium for PFML insurance, the employer drops insurance coverage and joins the state program. DPFML and MDI were contemplating fashioning a penalty that would equate to a fiscal quarter of employer/employee contributions.
5. Here is the point…if an employer purchases a fully insured private plan option today and dislikes it tomorrow because of rate increases -- and wants to join the state program, they will likely incur some type of penalty to account for the fact that they are joining a program for which they have made no contributions.
6. The “DISCLOSURES” that the MDI is working on would require carrier disclosure of dumping penalties.

 What Are Employers Doing?

1. Many employers who are interested in a fully insured private plan are going into the state program for a quarter or two until the insurance solution and potential penalties are settled. That will allow them to make a fully informed decision on premiums and risk of dumping.
2. ome employers are 100% fully invested in an insurance solution, are near 100% certain they will never be in the state program, and feel comfortable getting a DOI now and applying for a fully insured private plan exemption now.
3. ome employers are self-funding until they see some stability in the insurance marketplace.
4. hen making a decision on whether to pursue a fully insured or self-funded exemption, employers should appreciate their company’s leave program, benefits culture and risk tolerance.
5. When speaking with a carrier, employers should inquire about potential employer penalties triggered by their leaving a fully insured program and joining the state program.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. Copyright © 2019 Marsh & McLennan Agency LLC. All rights reserved.