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Self-insurance group steps up effort to expand scope of RRGs coverage

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PHOENIX--Employers will have new opportunities to self-insure property exposures if the Self-Insurance Institute of America Inc. and other proponents of expanding the federal Liability Risk Retention Act have their way.

Speaking at SIIA's 26th National Educational Conference & Expo last month in Phoenix, James Kinder, chief executive officer of SIIA, emphasized that there is a lot of interest in broadening the Risk Retention Act to include property coverages.

"We all know what has happened to us recently in property exposures, with the major disasters that have occurred," Mr. Kinder said of the catastrophic storm season in 2005. Heavy losses have led some lawmakers to listen to proposals to give employers new alternatives to fund their property exposures, he said.

"There has been a big push on Capitol Hill to drop the word 'liability' in the Risk Retention Act" and allow it to "include other forms of coverage," Mr. Kinder said.

As momentum to change the act has built, SIIA has stepped up its effort to encourage lawmakers to broaden the legislation.

The association recently formed the American Risk Retention Coalition "specifically to work on the Liability Risk Retention Act and have a seat at the table on this important legislative issue," said Mr. Kinder.

And SIIA is looking for help in the effort to expand the act. "There are other associations that are involved" in urging lawmakers to make changes to the legislation, Mr. Kinder said. "They are not competing organizations at all," he added. "We hope they will join the coalition."

Richard C. Goff, chairman of the coalition and a member of SIIA's board of directors, said the coalition is going to do more than work at expanding the risk retention legislation.

"Please don't think of it as specifically focused on" property and casualty. There are other uses for risk retention groups that need to be promoted, Mr. Goff said at the conference.

For example, he said, "There is one risk retention group that I'm aware of that is actually offering medical stop-loss (coverage) written on a property/casualty form to a national group of contractors. And the beauty of this design is that it has totally circumvented" any potential state attempt to regulate it as a medical stop-loss carrier writing health insurance, he said.

"That is a very positive event," he said of the formation of the contractors' RRG, and one that represents an opportunity for SIIA members who need similar coverage.

The stop-loss regulation issue is one SIIA continues to battle. Some states have enacted laws to regulate and impose assessments on stop-loss policies as health insurance policies. The assessments typically are made to help fund deficits in states' high-risk insurance programs.

SIIA believes stop-loss insurance should not be treated as health insurance and attempts to regulate it as such affect the administration of self-insured group health plans.

Stop-loss model

SIIA has developed a model act proposing to regulate stop-loss insurance under state law as a type of coverage apart from health insurance. The association is working with legislators to adopt the act at the state level.

A high priority for SIIA in 2007 will be to continue its support for regulating association health plans under federal standards, which would allow the plans to operate across state lines with uniform regulations.

SIIA also has approved a policy position opposing any changes in the federal tax code that could compromise the employment-based health care system.

The group remains on the fence, though, as momentum gathers to change the way property/casualty insurers are regulated.

The movement towards a potential system that would allow federal regulation or oversight of U.S. insurers is gaining steam, said Michael Ferguson, executive director of SIIA. "The discussion has certainly ramped up in the last few years and it's peaked, I think, this year, as we have seen a couple of different legislative initiatives introduced in Congress."

One path to federal regulation would lead to development of an optional federal charter for insurers, he said. Under such a charter, insurers would be given the choice of submitting to federal regulation or remaining under state authority. "Clearly, for some insurers, the federal regulation would be preferable" and for others, the state choice would make more sense, Mr. Ferguson said.

An alternative to the charter would be to establish uniform federal standards that states would be responsible for enforcing, he said.

"We do not have an official policy position yet" on the federal regulation of insurance, said Mr. Kinder. Other insurance industry organizations are divided on the issue, he pointed out, with some of their members favoring federal oversight and others wanting states to retain regulatory powers.

"The stakes are high," Mr. Ferguson said, because either way the legislation goes, it could open and close opportunities for SIIA members. The association will closely follow the issue and provide information to its members as legislation is developed, he added.