Self-insurance battle continues at NAIC fall meetingNews added by National Underwriter on November 30, 2012
National Underwriter

National Underwriter

Joined: April 22, 2011

By Allison Bell

A panel at the National Association of Insurance Commissioners (NAIC) today decided against putting new curbs on use of small group health insurance stop-loss arrangements.

The panel -- the ERISA Working Group, an arm of the NAIC's Health Insurance and Managed Care Committee -- blocked a stop-loss motion during a session in Washington, at the NAIC's fall meeting.


Employers that create cash reserves to fund their health plans rather than buying traditional insurance often buy stop-loss insurance -- insurance for group health plans -- to protect themselves against catastrophic losses. A stop-loss program could have a per-employee "attachment point," or deductible, a whole-plan deductible, or both.

Panels at the NAIC have been talking about the possibility of updating the NAIC's Stop-Loss Insurance Model Act, which was approved in 1995. The ERISA Working Group has been looking into the idea of amending the guidelines that help regulators, stop-loss providers and others apply the model act.

The per-employee attachment point could increase to $60,000, from $20,000, and the whole-plan deductible could increase to $15,000 times the number of people in the plan, from $4,000 times the number of people in the plan.
Only 3 states -- Minnesota, New Hampshire and Vermont -- have adopted the entire 1995 model; 18 other states have adopted parts of the model.


The Patient Protection and Affordable Care Act of 2010 (PPACA) exempts self-insured plans from many of the rules that apply to insured group plans. Some observers have argued that letting small employers use a combination of self-insurance and stop-loss arrangements with very low deductibles could help them evade the new PPACA rules.

If small employers self-insure, that could deprive the workers in those plans of protection from much-needed PPACA consumer protection provisions, PPACA supporters say.

If the small employers that self-insure have younger, healthier workers than the small employers that stick with insured plans, that could drive up rates for insured small group plans and destabilize the small group health insurance market, according to advocates of changing the stop-loss rules.

The ERISA Working Group

The ERISA Working Group today blocked efforts to move forward with the changes by refusing to pass a motion supporting adoption of the proposed draft guideline amendments, according to an NAIC session summary. The vote tally was not immediately available from the NAIC.

The working group did not kill efforts to change the stop-loss guidelines altogether. It did pass a motion agreeing to ask another NAIC panel, the Regulatory Framework Task Force, to "develop a white paper analyzing the potential impact of small employer self-insurance on the small group market beginning in 2014," according to the NAIC.

The fall meeting packet included a copy of an Urban Institute study on self-insurance provided by Timothy Jost, a law professor who officially represents consumer interests in NAIC proceedings.

In the paper, Matthew Buettgens and Laura Blumberg contend that small employers' efforts to get around PPACA by self-insuring could drive up the cost of employer coverage for single employees by as much as 25 percent.

A representative for the Blue Cross Blue Shield Association said during a working group conference call held Nov. 29 that the association is not sure what it thinks about the proposed draft guideline changes but wants states to regulate who can buy stop-loss insurance.

Hobson Carroll, a risk management specialist, said he believed that the market would keep very small groups from self-insuring simply to evade PPACA requirements by making stop-loss premiums and administrative costs much higher for very small groups than for larger groups.

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