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Locking the door

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Group health benefits -- most of us have them, relatively few understand their details. Like cars and computers, most consumers aren't really interested in knowing what goes into making them or how they function as long as they "work" when you need them, and aren't a bother when you don't.

Perhaps that is why there has been so much confusion regarding the nuances of the U.S. Department of Health and Human Service's decision to require all health care plans in the country to fully cover contraceptives, sterilizations and drugs such as ella, which can cause early abortions. Churches that have a moral objection to these services, such as the Catholic Church, can be exempted from the requirement. However, the health plans of most Church-affiliated organizations, such as Catholic hospitals, universities and charities, will still be forced to cover these morally objectionable services.

Since it was announced last year, the US bishops have been pushing for expansion of the conscience protection under the regulation. They were disappointed when on Jan. 20 the Obama administration announced that conscience protections would not be expanded, but instead nonprofit organization would have an additional year to comply with the mandate. They were further disappointed when on Feb. 10 the president personally announced what he called "a compromise" which would require insurance companies to pay for the objectionable services but not employers with a religious objection.

One argument made by those supporting the HHS mandate that has caused readers to contact The Pilot for clarification is that 28 states, including Massachusetts, already mandate coverage of contraception in all health insurance plans. If so, why is the HHS mandate so onerous?

To understand the complete answer to this question, it is important to understand the difference between health insurance and health benefits. Most of us are in the habit of saying that we have "health insurance" from our employers, when in reality that may not be entirely the case.

Most of us understand the concept of insurance, such as we might have for our car or home: One pays a premium to an insurance company and, in exchange, the company assumes the risk of paying claims for losses according to the terms of the contract. Regulation of insurance falls to the states. Therefore, the state can mandate that insurance companies retain proper amounts of funds to pay claims or require them to cover services, such as contraception, in health insurance plans.

However what many do not realize is that most employers of any appreciable size, down to as few as 20 employees (which therefore includes most Catholic organizations) do not have "insurance" of this type. Instead, they choose to "self-fund" or "self-insure" their healthcare benefits. In this case, the employer simply pays the claims of employees according to the terms of their health benefit plan. It would be something like an individual deciding not to buy automobile insurance but instead setting aside a certain amount of money every month to pay for damage in the event of an accident. As one can imagine, for a good driver, this approach could prove less expensive than paying an insurance premium that goes out the door every month, whether or not it is ever used. The same concept holds true for most large group health plans. Therefore, most large employers choose to self-insure their health benefits, though they do take out special contracts called "stop-loss" contracts which, as the name implies, guard against unusual, catastrophic expenses.

Now, since most employers do not have a network of discounted providers and are not set up to properly handle claims (for example to know which services are necessary or whether charges are excessive) they contract with what is known as a "third-party administrator." Essentially, the third-party administrator handles the claims of the employees and passes along the expense to the employer. In many cases, this third-party administrator may be an insurance company such as Blue Cross or Tufts. Employees may have a card with the name of an insurance company on it, but the insurance company is not assuming the risk for the claims, they are merely acting as processors, not providing insurance. All this is mostly transparent to the employee using the health plan -- it is designed to be. Employees should not worry about who is funding their claims when they have a medical need, only that that claims will be paid.

However, there is a fundamental difference between an insured and self-funded health plan. In the case of a self-funded plan, because there is no insurance, it is not subject to state law, and therefore state-mandated benefits. Instead, it is only subject to federal law. This is one of the major ways Catholic institutions have been able to avoid being required to comply with state mandates they find objectionable.

Here then is the rub: the new HHS mandate is a federal law and therefore it applies to all plans whether self-funded or insured. For the first time, self-funded health benefit plans find themselves being required to offer specific benefits. In creating a federal contraception requirement, the Obama Administration has not only shut the exit door for health plans, but locked it.

Therefore we can also see the difficulty with President Obama's "compromise," that only insurance companies will be required to pay for these objectionable services, not the employer. How will that work in case of self-funded plans where the employer is, in effect, the insurer? As of this writing the administration has not provided specifics of this proposal. Like the U.S. Conference of Catholic Bishops, we await the details. However if past experience with this regulation is an indication, we are not optimistic that the results will be favorable to the Catholic institutions.

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