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PPACA: Producers Defend Current Stop-Loss Rules

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Benefits brokers and benefit plan administrators have written to a panel at the National Association of Insurance Commissioners (NAIC) to ask it to leave the current rules governing small group health insurance stop-loss arrangements unchanged.

The panel — the ERISA Working Group, an arm of the Health Insurance and Managed Care Committee at the NAIC, Kansas City, Mo. — talked about stop-loss risk-retention requirements Saturday during a session in Atlanta, at the NAIC’s summer 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 is 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.

Defenders of the current stop-loss rules contend that low-deductible stop-loss arrangements have helped small employers offer the same kinds of flexible, high-quality, relatively affordable health plans that much larger employers offer.

Christina Goe, the Montana insurance regulator who serves as the chair of the ERISA Working Group, says in a memo that the working group is thinking about updating the stop-loss model, even though few states have adopted it, because many states have used the NAIC minimum stop-loss deductible levels without necessarily adopting the whole model as a law. In some cases, she says, states have used the recommended minimum deductibles in bulletins or in the stop-loss policy form review process.

The working group and others supporting model changes are not trying to put stop-loss insurance out of reach for small employers, Goe says.

“The attachment points in the Stop Loss Insurance Model Act have not been revised since the model was adopted in 1994,” Goe says. “The charge before the ERISA Working Group is to revise the attachment points so that they are in keeping with medical inflation and changes in the typical underlying health plan design. This issue has been around since before 1995 and continues to exist today, even if the [PPACA] had not been enacted. The Working Group believes that, as a threshold matter, it is reasonable to update dollar amounts that are over 17 years old.”

About 15 benefits brokers and “third party administrators” (TPAs) — benefit plan administrators — have written to the NAIC to ask regulators to leave the stop-loss minimum rules unchanged.

The brokers and TPAs say changing the rules would hurt small employers who are doing their best to offer high-quality health benefits.

“These changes are not in the best interest of the American people,” according David O’Shea, a regional sales director in the Alexandria, Va., office of Significa Benefit Services Inc.

Felcia Wilhelm, president of Prairie States Enterprises Inc., Chicago — a TPA — wrote in her capacity as an employer.

“I am a woman employer with 70 employees,” Wilhelm says. “We have been self-insured for over 20 years. We did this so that we could offer better benefits at lower cost to our employees than what was available in the fully insured market. There are many stop loss carriers to choose from, allowing us to obtain stop loss insurance and good rates with affordable deductibles. Why would anyone want to change this and force me to fully insure an inferior health plan for my employees? … Please come out in favor of preserving self-funding as a great option for even modestly sized employers.”


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