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What is a health insurance plan sponsor?

The lowdown...
  • Health plans are agreements with insurance providers to cover the hospital and medical needs of a particular group of eligible members.
  • The parties to a health insurance contract are the insurance provider and the policyholder
  • Health plans are agreements between insurers and individuals or groups policyholders
  • Group insurance the policyholder is an employer, labor organization, employee association, or other forms of sponsor
  • In health insurance management, a sponsor may also develop contract relationships to manage and promote the plan

Health insurance sponsors organize health plans and present then to groups or individuals and families. Sponsors can be any business qualified to do insurance risks by state laws.

These are not state exchanges that provide Marketplace policies and federal subsidies. Typical sponsored plans include health insurance and prescription drug coverage.

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The Sponsor Is the Policy Owner

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The sponsor negotiates terms of the health plan services and benefits. The sponsor then executes the master agreement with the insurance provider. The policyholder can be the insured in individual situations.

In group insurance, the policyholder can be the owner and the plan administrator.

  • In a group setting, the owner issues certificates to authorize group members to use plan benefits and services.
  • In group insurance, only the owner can change basic terms of the plan.
  • Group members can choose between offered options but not alter the basic terms.
  • In family and individual situations, the sponsor designates the insured beneficiaries. The plan must accept qualified applicants with the ability to pay.

The Internal Revenue Code has a strong set of reporting requirements keyed to the individual mandate, the employer mandate, and the penalty provision of section 5000(a). Section 6055 prescribes the IRS method for confirming minimum essential coverage.

The agency uses section 6055 reports to determine compliance with the individual mandate and the employer mandate. Section 6055 also requires notice to the insured beneficiaries.

Guaranteed Acceptance

The Affordable Care Act changed the health insurance industry in fundamental ways. The role of insurers and sponsors changed with the rule for guaranteed acceptance. Insurers can no longer refuse to accept applicants because of prior conditions or medical underwriting.

Sponsors have the same requirement, and they must accept all applicants that have the ability to pay.

Obamacare set a rule requiring every eligible person to have qualified health insurance coverage. The rule has exceptions based on taxable income and exempts those that do not meet the minimum threshold for filing a tax return.

The mandatory coverage must meet the standards of the law for coverage and content. The essential goal was to require insurance that meets the typical needs of modern medical practice including hospitalization and medical care.

  • Minimum essential coverage
  • Minimum actuarial value of 60 percent
  • Essential health benefits

Running the Health Plan

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The law requires that self-funded plans and other sponsors vest management authority in some person or office within the organization. The executive function for the plan is often named the plan administrator or a similar title.

Insurance companies, sponsors, and employers must report to the IRS about health insurance coverage for their members or employees. The providers include:

  • employers
  • self-funded employers
  • labor organizations
  • associations
  • other sponsors

The insurers, employers, and sponsors must also report to the insured beneficiaries. The insurance providers must report the terms and periods of minimum essential coverage to the policyholders.

The group policyholders must report to the beneficiaries. The information for individuals is pat of the reporting to IRS. Taxpayers must acknowledge their status as insured by minimum essential coverage on IRS Form 1040 at line 61.

Sponsor Must Offer Qualified Plan

The offer of insurance from an employer or another sponsor must be for qualified health coverage. The IRS will not enforce the penalty for no insurance if the policyholder offers minimum essential coverage.

Employer-sponsored insurance is not affordable within the meaning of the Affordable Care Act if it costs more than 9.6 percent of the annual family income.

Affordable insurance for individual and family purchase may not exceed eight and one-tenth percent of the annual family income. Comparison shopping is a proven and effective way to select health insurance for individuals, families, and employees.

Management and Promotion

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Plan sponsors can also engage commercial and other enterprises to manage subscribers, promote the plan, and encourage increased participation in health insurance. Some sponsors manage the plan but contract to specialists for greater efficiency.

Areas for specialist management include the below-listed coverage areas.

  • Pharmacy service and prescription benefits
  • Mental health, alcohol and drug abuse
  • Tobacco cessation

The Federal Model Managed Competition

The FEHB is a frequently cited model for health insurance that provides comprehensive services and benefits while promoting price competition.

The federal system is remarkably simple and has a solid base of economic support in the federal employer. The federal employees pay an average of 28 percent of the costs of premiums.

The system has more than 200 sponsors including some large traditional labor unions groups and name brand private insurers.

Medical Care Provider-Sponsors

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Private insurance provider-sponsors have structural obligations that may lead them to emphasize other fields of business equally or with greater weight than group or individual health care.

The industry has a number of large consolidations pending, and if they pass review, fewer decision makers will determine the shape of the marketplace. The hospitals and doctors that engage cities and local communities may become sponsors in greater numbers.

The medical care provider commitment depends less on showing dramatic profit margins than in showing positive patient outcomes and demonstrating medical value for the investments of time and resources.

The Role of the Health Insurance Plan Sponsor

The health insurance plan sponsor plays a critical role in health insurance.

These organizations work with private and non-profit insurance companies to organize health plans. Insurance provider-sponsors traditionally developed group plans for employers.

In response to the universal mandate of Obamacare, many insurance companies moved into the individual and family market. They pair with sponsors, and these policyholders have the rights of ownership.

Although beneficiaries pay premiums, deductibles, copays, and coinsurance, the sponsors are ultimately responsible for payment of premiums. As group policyholders, sponsors control the right to access benefits and services.

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