There was some controversy last week when I published data that indicated large health plans can pay 10 to 15 times as much to cover a participant in a health plan compared to their small policy counterparts.
While I can certainly make mistakes (ever forget to carry the one?), I'd like to go into the methodology that lead to that conclusion and hopefully give readers the chance to poke holes where they exist. Some of the comments I received included: outright incredulity, "these are probably self-funded plans," and "these are probably monthly costs." I'd like to address each concern in turn.
Cost vs. premiums
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This actually might be the biggest source of confusion. The field I used to calculate "costs" was premiums paid to the insurance carrier: specifically, the total premiums paid on nonexperience-rated contracts (Schedule A Part III Item 10a). Running a massive health plan is certainly going to incur administrative and other costs above and beyond the actual premiums. Unfortunately, those are rarely, if ever, tracked.
Self-funded plans
The 5500 lays out four different methods for the funding of any benefit plan: insurance, Section 412(e)(3) insurance contracts, trust and general sponsor assets. The first two generally would describe an "insured" plan, while the second two would fall under "self-funded." And certainly there are plenty of plans that are partially one or the other.
It's a moot point: Because the data came from the Schedule A, which is filed by the insurance carrier itself, the data would only relate to health policies that were insured. Claims paid under a self-funded arrangement should, at least in theory, not be listed on a Schedule A.
Month vs. year
Some of the commenters thought the data for large policies were monthly costs and the data for small policies were yearly costs. I'm not sure why policies of different sizes would file the same form for different lengths of time, but regardless, the Schedule A clearly states the contract period, and in the case of this study only those plans that extended for a full 12 months were taken into account.
And there you have it.
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