Benefits and Compensation

Stop-loss Restrictions Advance in Several States

Fast-moving events have advanced state-level proposals aimed at regulating stop-loss, which would make it more expensive for small employers to self-insure health benefits, and put power over self-funding in the hands of state insurance commissioners.

Utah law now requires stop-loss insurers to cover incurred and unpaid claims if a small employer plan terminates — an unprecedented requirement. That law passed last month.  

On May 14, California stop-loss control legislation (S.B. 161) with a small-group minimum specific attachment point of $65,000 was approved by a Senate health and appropriations committee. As noted earlier, it is now slated for a full-Senate vote. As that vote looms, Senate Committee Chairman and bill sponsor Ed Hernandez (D) indicated a willingness to lower that attachment point further, but that issue was still being debated.

On May 5, the Colorado Senate Committee on Health and Human Services approved H.B. 13-1290, which would: 

  • create a $30,000 minimum stop-loss attachment point; 
  • force stop-loss insurers to report the size and number of small health plans they insure; and
  • empower the insurance commissioner with additional rule-making authority to further regulate stop-loss insurance. 

While the stop-loss attachment point requirements are not as punitive as California’s, they still reflect the view that the state commissioner should have power to unilaterally alter self-funded plans.

In Idaho, H.B. 0199 has been signed into law and extends certain regulatory and reporting requirements currently imposed on multiple employer welfare arrangements operating in Idaho to single employer self-insured group health plans. This includes the mandate that claims be funded and paid through a separate trust and that those trusts maintain minimum reserves. The law, most self-funded plan sponsors would agree, should be preempted because it imposes direct state regulation on single-employer self-funded plans.

In Rhode Island, stop-legislation that had stalled due to industry opposition was quickly revived, to our surprise and dismay. The House passed a substitute bill (H.B. 5459) and it now moves to the Senate. The substitute bill contains a minimum specific attachment point requirement of $20,000 (down from $60,000 in an earlier version). However, it would give authority to the insurance commissioner to create new rules affecting stop-loss insurance.

Legislation in North Carolina would impose new restrictions on stop-loss policies sold to groups with 20 or fewer employees. However, these restrictions would not apply if employers reimburse for outcomes, embrace the medical home model and adopt wellness program elements. Under H.B. 934 (not yet been scheduled for a hearing), aggregate policies would be prohibited and specific attachment points could be no lower than $60,000. The bill’s restrictions however, would not apply to employers that provide access to a medical home that provides health care screenings, is focused on outcomes and key performance indicators, is reimbursed on outcomes and curtails fee-for-service reimbursement.

Click here to read more about state efforts to restruct self-insuring health benefits by small companies. For more of the latest news and information pertinent to self-insuring your health plan, go to the Employer’s Guide to Self-Insuring Health Benefits.