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Demonstration of Sufficient Funding


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A client forwarded me a memorandum from the National League of Cities summarizing the PPACA? It contains the following bullet item:

"Local governments that self-insure must, after two years, demonstrate to the Secretary of Health and Human Services that their self-insurance plans are sufficiently funded or capitalized to cover all likely medical claims."

A Google search shows various permutations of this always in connection with state and local governments (but perhaps the principle applies to all self-insured plans).

I cannot find anything close to this in the new law, whether for local governments specifically or for self-insured plans in general. I imagine, if the PPACA contains this requirement, it would be a really big deal.

Can anyone shed any light on this? What the heck am I missing?

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The statement doesn't make sense from another perspective: frequently governmental units fund plans on a "pay as you go" basis, budgeting for their projected expenses each year. I wonder if the language was left over from the anti-Obama scare stuff.

This is besides the obvious: such a provision would violate the "separation of powers" clause of the US Constitution.

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In my experience, most single employer self-insured plans "pay as you go," not just governmental plans. That's why I think this would be a big change (and why I am skeptical).

I thought too that the statement was out-of-date but the memo purports to have written after the law was passed.

Here is a link to the memo:

http://www.memun.org/public/news/HealthCareReform.pdf

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For what it's worth. I ran into a similar situation about 12 years ago in upstate NY. A group of govt agencies came together under a single self-funded medical plan. State of NY then changed the regs so that the plan had to have reserves on hand, and effectively, act like an insured product. Long and short of it, they ended up leaving that environment and going with a Minimum Premium plan.

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