Can one write a WRAP Plan or is it prohibited?

See also – Ben E Lect    Section 105

July 2020 – Latest Court Case says YES
Here’s a letter on WRAP plans…

Ben E Lect Summary Letter

Wed 5/17/2017 2:01 PM
Good afternoon, 

I have some news for you that is exciting for us, and hopefully for you as well.  We have a lot going on in our offices, but I want to keep this announcement short and only address one topic in which many of you have inquired. 

For years, Mark Reynolds has put up the good fight against California’s largest carriers for their practice of restricting wrapping in the small group market.  This restriction has consistently put agents in a tough position and it eliminated choice from small employers who needed the option of lower cost plans.  He tried to take the legislative path and did not get anywhere.  He tried to partner with the carriers and did not get anywhere.  This left us with no option but a lengthy court battle where all the facts could be laid out and the long held argument of access and utilization could be had. 

We are pleased to announce that May 10, 2017, BEN-E-LECT received a final judgment in its lawsuit against Anthem Blue Cross of California.  The judgement ruled in favor of BEN-E-LECT and prohibits Anthem Blue Cross of California from placing restrictions surrounding HRAs on its plans in Small Group effective immediately.  Agents no longer need to fear losing commissions or appointments with the carrier as a result of presenting the best options to the employer. 

It was a long fought battle, and one that Mark carried for many years, on many different levels.  The decision to make it a formal fight was not an easy decision for us, but one that we knew was necessary for the benefit of California’s small employers.   

This was a true David versus Goliath battle, and we are beyond pleased with the outcome.  Many of you were a part of this battle and for that we say, “thank you”.  It couldn’t have been won without you.   

I hope you have a wonderful day and rest of the week.

Stacy Morris, CHRS
Vice President / General Manager
SB 1431 Self Funding for Small Employers
Pending Legislation to Limit Self Funded Plans?
LA Times 3.23.2012

NOTICE – DOI Letter on Self Funded Plans (Wraps)

To:  All Health Insurers Selling Insurance to Small Employers in California
Date:  December 15, 2010

On October 1, 2008, the General Counsel of the California Department of Insurance issued a legal opinion letter (“Letter”) stating that insurers may prohibit small employers from “wrapping” a Health Reimbursement Account or other employer deductible payment mechanism with a high-deductible insurance policy.  The Letter also permits insurers to charge more for policies that allow wrapping.  The Letter interprets and applies the Small Employer Insurance chapter of the Insurance Code, Ins. Code §§ 10700-10718.7 (“Act”).

The Letter states that if an insurer seeks to prohibit wrapping, the insurer must set forth that restriction in the benefit plan design (“BPD”).  Insurers must file all BPDs with the Department.  Ins. Code § 10717.

The purpose of this Notice is to alert all health insurers selling insurance to small employers in California to the following:

1.  The Department will undertake enforcement action against any insurer that prohibits wrapping and does not have on file with the Department a BPD setting forth a restriction on wrapping.  Ins. Code § 10718, 10718.5, 10717(e) & 10700(v).

2.  Insurers that prohibit wrapping should provide actuarial documentation to the Department establishing by clear evidence that wrapping materially and significantly increases utilization of medical services by employees of small employers.

3.  Insurers that permit wrapping but charge more for policies that may be wrapped should provide actuarial documentation to the Department establishing by clear evidence (a) the extent of increased utilization of medical services by employees of small employers that wrap and (b) that the increased premium accurately reflects the extent of increased utilization.

4.  The Department will review all actuarial documentation.  If the Department concludes that documentation does not establish by clear evidence the facts described in Nos. 2 and 3 above, the Department will notify the insurer that the BPD may not be sold with restrictions on wrapping or based on higher pricing for wrapping.  Ins. Code § 10717(e); id. § 10700(v); id. § 10700(b).

Adam M. Cole

General Counsel

2 comments on “Wrap Plans HSA HRA now allowed legal history

  1. Steven,
    Do you know if Small Group Kaiser has filed the BPD prohibiting Wraps and provided the actuarial docs to substantiate claim of over utlization? if so, did Dept OF Ins rule on their filing?
    Kaiser is saying can’t wrap under 100 ees….

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