Wrap-around packages examined

October 15, 2008

Some brokers say wrap-arounds are helping their clients provide a policy that both employers and employees can afford, but insurers disagree. At least one broker has been terminated.

Blue Shield of California has terminated a broker for selling a so-called “wrap-around” high-deductible plan package to a small employer, reports the Sacramento Business Journal.

Several plans, including Blue Shield of California, Health Net, Kaiser Permanente and Anthem Blue Cross, have sent letters to insurance brokers threatening to terminate the broker's contract and withhold commissions if brokers sell these packages to employers.

Some brokers say that they are helping their clients provide a policy that both employers and employees can afford. The health plans, meanwhile, say that the high-deductible plans don't make money unless consumers are forced to bear the initial cost of care and make careful decisions.

“Barring new state regulatory guidelines or rulings, the health plans are within their rights to place such restrictions on broker agreements, but if employers purchase wrap-around financing directly without an agent, the plans would undoubtedly receive greater regulatory scrutiny if they tried to enforce such a policy directly upon employers,” says Clive Riddle, president and founder of MCOL, a provider of managed care resources.

This also raises some interesting questions, says Riddle. Some plans around the country are promoting financing arrangements for the high-deductible requirements (i.e., bank financed credit lines, etc.).

“Such arrangements result in the consumer paying a monthly fee—the credit line payment—for the medical services received under the high deductible, which isn’t all that different than paying a monthly fee for a wrap-around premium,” he says. “One could also argue that the level of the high deductible should come into consideration. It is one thing to expect ‘skin in the game’ for a $2,000 deductible, and another if it’s a $10,000 deductible. You could certainly make an argument for allowing wrap-around insurance policies to cover the difference between the those two levels, but disallowing them below the lower level. Once the deductible goes high enough, it becomes more a financing issue than a utilization issue.”