Government agencies seek information on use of stop-loss insurance

WASHINGTON—Several federal agencies are seeking information on how group health plans use stop-loss insurance, focusing on the prevalence of stop-loss coverage at low attachment points.

Stop-loss coverage is purchased by self-funded employee benefit plan sponsors to serve as a hedge against potentially catastrophic claims. It is available in two forms: specific stop-loss, which covers individual claims that exceed a predetermined deductible; and aggregate stop-loss, which covers claims that exceed a specified attachment point for the entire group, usually 120% to 125% of total claims. Small and midsize employers that self-fund their health care benefits are more likely than large employers to purchase stop-loss coverage.

The Departments of the Treasury, Labor and Health and Human Services sought comment Friday on the proposal.

Meanwhile, in a separate but related move, the California State Senate Health Committee on Wednesday passed and referred to the Appropriations Committee a measure that would raise the minimum deductibles at which stop-loss insurance could be purchased in the state to $95,000.

As amended April 9, the proposed bill, S.B. 1431, also would prohibit aggregate stop-loss attachment points that are less than $19,000 times the number of plan members or 120% of expected claims, whichever is greater. It also would bar specific deductibles of less than $95,000 per individual.

In testimony given prior to the committee vote, Mike Ferguson, chief operating officer of the Self-Insurance Institute of America Inc., said the proposed legislation would significantly hamper the ability of many small and midsize employers to self-fund health benefits, a tactic that most large employers have used to keep their costs in check since the passage of the Employee Retirement Income Security Act in 1974.

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He also warned California lawmakers that any attempt to regulate self-funded benefits would likely face an ERISA challenge.

“While some states have attempted to regulate stop-loss within its insurance oversight role, the courts have rejected such attempts that impose requirements when they relate to self-insured group health plans. There is no question that S.B. 1431's provisions would impact impermissibly on the benefit risk structure, terms and conditions, and administration of ERISA plans,” he said in the written testimony.

As for the federal proposal that was released Friday, written comments on the use of stop-loss coverage by self-funded benefits plans may be submitted to the Department of Labor via the federal eRulemaking Portal at http://www.regulations.gov, viavia e-mail at E-OHPSCA-STOPLOSS.EBSA@dol.gov or by mail or hand delivery to the Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, Room N-5653, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attention: Stop Loss Comments.