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Insurers Commissioners Signal Retreat on New Stop-Loss Insurance Regulation and Discuss MEWA Issues

On August 26, 2013

August 26, 2013 – Comments made by regulators over the weekend at the summer meeting of the National Association of Insurance Commissioners (NAIC) in Indianapolis made it clear that ongoing pushback by SIIA and other stakeholder groups has dampened enthusiasm for new stop-loss regulation.

As an alternative, the NAIC ERISA Working Group agreed to move forward with the preparation of a white paper discussing regulatory issues associated with small employer self-insurance and the use of stop-loss insurance. To initiate this project, the Working Group recently surveyed all 50 states to obtain preliminary data regarding perspectives on regulatory activity.  
Survey results included the following:

  • 23 states responded to the survey (AK, AL, AR, CT, CO, GA, HI, MI, MD, ME, MO, NC, ND, NE, NV, OK, OR, TN, UT, VA, WA, WI, and WY);
  • 16 of the states responding (AK, AR, CT, CO, MD, ME, MO, NC, ND, NV, OK, OR, TN, UT, WA, and WI) reported having laws or policies regarding medical restrictions;
  • The remaining seven states (AL, GA, HI, MI, NE, VA, and WY) reported either not having specific stop loss insurance laws or did not include specific requirements beyond filing requirements for stop loss;
  • 12 states (CT, CO, GA, ME, MI, NC, NE, NV, OR, TN, UT, and WI) indicated some level of interest in self-funding in the small employer market since the passage of the ACA;
  • 11 states (AK, AL, AR, HI, MD, MO, ND, OK, VA, WA, and WY) responded that the level of interest in self-funding in the small employer market was unknown or very little;
  • One state (MI) indicated that it has seen an increase in self-funded MEWAs;
  • Five states (AR, CO, NC, RI, and UT) have changed their stop loss rules recently in response to the ACA; These changes affect stop loss by either imposing specific limits or introducing restrictions or caveats regarding the writing of this risk.

‚ÄčIt was reported that work will continue on this White Paper, with the goal of completion by the end of the year. Individual states could then utilize the findings on an advisory basis.

In Other ERISA Working Group News….
DOL Presentation on New Employee Benefits Security Administration Final Rule on Ex Parte Cease and Desist and Summary Seizure Orders for MEWAs.  The DOL made a presentation to the Working Group and reminded them that the ACA authorizes the DOL to issue a cease and desist order ex parte (without prior notice or hearing), and the DOL may issue a summary seizure order when it appears that a MEWA is in a financially hazardous condition.  The DOL talked about MEWA regulations, and there was significant discussion regarding insolvent plans and the need to identify and police these better.  The DOL mentioned with regard to cease and desist orders and summary seizures that it has expanded its breadth of financial review to include the brokers as well as the fiduciaries of the plans.  However, the DOL noted the distinction between unfunded health plans, which pay claims out of their operating budgets, and self-funded health plans, which pay claims from a trust or separate account.  The DOL noted that it does not have a good method to locate these unfunded plans prior to an insolvency event.  Members of the Working Group asked if the DOL could develop regulations to address this deficiency, but the DOL said it did not think it was feasible to write such regulations.

Sham MEWA Plan Investigations.  The regulators then met afterwards in a private session to discuss sham MEWA plan investigations.

Stop-Loss Battle Expands to Four States

On March 12, 2013
March 12, 2013 – Utah has become the fourth state that is considering legislation that would make it more difficult for employers to operate self-insured group health plans by restricting the availability of stop-loss insurance.

Known as the Small Employer Stop-Loss Insurer Act, HB 160 applies to groups with 50 or fewer employees. Unlike stop-loss legislation in California, Minnesota and Rhode Island, attachment point requirements in this bill are not onerous, but does contain a provision requiring stop-loss carriers to pay claims incurred but not reported if the plan terminates. The bill would also prohibit lasering.

Other provisions include:

  • Insurance Commissioner will create a standard stop loss application form for small groups
  • Policy must guarantee rates for 12 months – only exception is to price for a change in benefits of the Plan
  • Specific and aggregate coverage required
  • Requires the stop loss to provide gapless coverage
  • Minimum specific attachment point = $10,000
  • Minimum aggregate corridor = 90%
  • Contract basis no less favorable than 12/24
This is a developing story so please watch for further exclusive reporting from SIIA. The full text of HB 160, as well the other state stop-loss bills can be accessed on-line through the members’ only section of the association’s web site at www.siia.org. Please contact SIIA Chief Operating Officer Mike Ferguson at 800/851-7789, or via e-mail at  mferguson@siia.org should you have any questions or would be interested in helping to oppose the legislation in Utah.