Underwriter to exit insurance market as new regulations take effect
Posted on January 14, 2013
By R. Scott Nolen, News Department, AVMA Publications DivisionAVMA Group Health & Life Insurance Trust
medical coverage will end for some 17,500 Association members and thousands of their dependents at year’s end.New York Life Insurance
Company notified the GHLIT board of trustees Nov. 30, 2012, of its decision to no longer underwrite major medical coverage for professional associations after 2013 because of impending federal health care regulations.
With no other companies willing to take over for NYL, trustees had no other option than to terminate the medical insurance program, effective Dec. 31, 2013.
AVMA President Doug Aspros said, “I’m concerned about how this reality is going to affect our members, many of whom have relied on AVMA GHLIT health insurance for themselves and their families for many years.
“Fortunately, we have a year to help sort this out, and I’m confident that GHLIT, who are experts in this field, will help ensure that every member finds an appropriate medical insurance home.”
The AVMA Membership and Field Services Division has received several calls and emails about the announcement but fewer than expected, according to Dr. Kevin Dajka, division director. Comments ranged from anger at the AVMA and frustration with the change to confusion and fear about finding new medical insurance, he said.
Identifying with the anxiety of policyholders jolted by this news, GHLIT and AVMA leaders—many of whom themselves carry this coverage—are focusing now on how to help affected AVMA members.
New health care law to blame
GHLIT and NYL attribute the program’s demise to regulatory requirements put in place as a result of the Patient Protection and Affordable Care Act signed by President Obama in 2010. Company officials told trustees that the challenges of complying with provisions of the law that take effect in 2014 are the primary reason NYL opted to quit the association health insurance market entirely. NYL has underwritten the AVMA Trust’s medical coverage for the past 20 years.
AVMA members covered by GHLIT’s term life, disability income, and other nonmedical insurance policies will not be affected, as these policies will continue to be underwritten by New York Life. GHLIT CEO Libby Wallace recently told JAVMA News, “We approached a number of large and small insurance carriers about assuming this kind of business, but they all had the same reservations as New York Life.”
Later, in a presentation at the AVMA Veterinary Leadership Conference in early January, Wallace told the assembly that the health care law has fundamentally changed the way the Trust does business. “Prior to 2010, when the law was passed, the GHLIT medical insurance was a master group plan where we issued individual certificates to AVMA members for their health insurance. Beginning on January 1, 2014, we can no longer do that. They’re now being treated as individual health policies,” she said.
GHLIT alerted affected AVMA members Dec. 14, 2012, that their medical insurance would end the following year. Members were assured they will be covered throughout 2013, provided they pay their premium on time. The Trust pledged to establish a program to assist members with transitioning to a new policy that meets their needs and to work to ensure there are no gaps in their coverage.
Within two weeks of the GHLIT’s announcement in December, several hundred people had contacted the Trust. While a handful expressed anger at President Barack Obama for enacting the Patient Protection and Affordable Care Act, Wallace said most of them were simply afraid. “They don’t know what to expect,” she said. “Anyone who has a chronic condition is worried about the cost of that new coverage.”
Approximately 35,000 people are currently covered by a GHLIT medical plan that includes such options as a preferred provider organization, health savings account, and traditional indemnity. That total includes 17,500 AVMA member veterinarians, their dependents, and 1,428 veterinary students insured by the Trust’s student PPO plan.
Among the thousands losing their medical insurance are AVMA Executive Board members, trustees, and employees of the Trust, including Wallace.
As a trust “insurance designed by veterinarians, for veterinarians,” GHLIT has offered medical insurance to AVMA members at a group rate for 56 years. The 10-member board of trustees comprises nine veterinarians and one AVMA staff member who tailor the benefits package to the health needs of veterinarians, such as covering rabies prophylaxis. The board is the final level of appeals for denied claims. “Those are things that in the new world aren’t going to exist,” Wallace said in an interview with JAVMA News.
Other advantages of GHLIT’s medical insurance, Wallace said, are its portability and guarantee of coverage to applicants with pre-existing medical conditions.
While people are understandably worried, Dr. Aspros noted that a key fundamental of the new federal health care law is to allow people to purchase affordable health insurance, regardless of age or pre-existing medical conditions.
Events overtook lobbying, grassroots campaign
GHLIT trustees had anticipated the new health care law would usher in dramatic changes to the medical insurance market. Early in 2012, they warned AVMA leaders and members that impending regulations could require GHLIT to begin offering medical coverage outside the Association (see JAVMA
, March 1, 2012, page 488
To try to preserve its medical insurance program, the Trust hired a lobbyist to work with lawmakers and regulators to find a compromise that preserved the traditional understanding of association health plans. In addition, a grassroots campaign was initiated among AVMA members who contacted their congressional representatives to preserve the Association’s program.
Trustees point to two key events in 2012 that essentially meant the end of GHLIT’s medical insurance portfolio, however.
“Through most of 2011 and part of 2012, we were optimistic we’d be able to continue providing health insurance,” Dr. James Brandt, GHLIT board of trustees chairman, said. “But when the Supreme Court ruled the individual mandate was constitutional and President Obama was re-elected, we lost a lot of our enthusiasm. It seemed fairly evident at that time that New York Life would exit the association medical insurance business.”
As the underwriter for GHLIT’s medical plans, New York Life currently files its plans on behalf of the AVMA Trust in Illinois, and most states recognize the terms and conditions stipulated in that filing. If NYL were to have continued underwriting the Trust’s medical insurance, then starting in 2014, the new health care regulations would have compelled the company to file in every state as well as adhere to each state’s medical coverage and rate requirements.
New York Life informed GHLIT that complying with all the various state mandates was too burdensome. Additionally, NYL expects the new regulations will create market conditions and a regulatory environment that would put the company at a competitive disadvantage against government-subsidized medical insurance providers.
Dr. Brandt has been a member of the GHLIT board of trustees for eight years and served the past two years as chairman. He wasn’t surprised by NYL’s decision to exit the association health insurance market, nor does he fault the company for doing so. “The circumstances and changes in the regulations forced what I believe was a reluctant business decision on the part of New York Life, because they really wanted to continue offering medical coverage,” Dr. Brandt said.
One benefit among many
Dr. Dajka acknowledged that when a membership benefit is lost, an organization will necessarily worry about diminishing the value of association membership. But, he noted, medical insurance was just one of many advantages of being part of the AVMA.
“You do have to worry about the impact on membership, but you have to show all the things AVMA does besides offering medical coverage,” Dr. Dajka said. “We have other insurance products, including PLIT, which isn’t affected. We have over 57,000 members with that coverage, and there were no premium increases for 2013.”
All in this together
The AVMA GHLIT is in the early stages of researching whether a private medical insurance exchange is a viable option for Association members. Exchanges are like a market in bringing together insurance providers that offer a range of plans at various rates so individuals can select a plan that best meets their needs.Throughout the year, GHLIT will update members about developments related to their AVMA medical coverage as they continue assisting them with finding a new provider.“Members should realize we’re doing everything we can to make this transition a nonevent for them,” Dr. Brandt said.“There are a lot of uncertainties about the requirements of the new law, and we’re having to play it by ear, but don’t panic. Stay with the AVMA.”