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Financial Planning > Tax Planning > Tax Loss Harvesting

Stop-loss bills introduced in Minn., R.I.

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Rhode Island and Minnesota legislators have introduced bills that would restrict sale of some medical stop-loss insurance to captive insurers who self-fund their medical insurance.

The bills are H.B. 647 in Minnesota, and H.B. 5499 in Rhode Island.

They would bar medical stop-loss insurers from selling policies to self-insured employers of all sizes with specific deductibles less than $60,000.

They join California in proposing such legislation. Legislators in California introduced similar legislation last year as well, but passage was thwarted by strong opposition from the Self-Insurance Institute of America, which lobbies on behalf of risk-retention groups, especially in the healthcare area.

Mike Ferguson, SIIA chief operating officer, anticipates that several more states will propose such legislation in coming months.

He said stop-loss insurance is necessary for all but the largest risk-retention groups, because it ensures that the fund will not be wiped out in the event of a catastrophic loss.

Self-insureds and their trade groups perceive this as a back-door effort by states to impose greater regulation on self-insureds, or risk-retention groups, because they are barred by a 1987 federal law from regulating them directly.

Another objective is to steer more consumers into the exchange system created by the Patient Protection and Affordable Care Act, Ferguson said. The exchange system goes into effect in January.

Amongst other provisions, the Minnesota proposal would not permit stop-loss insurers to issue medical stop-loss policies to employers with 50 or fewer lives with an aggregate attachment point lower than the greater of $4,000 times the number of group members; 120 percent of expected claims; or $20,000. The bill requires stop-loss policies sold to groups with more than 51 lives to have annual aggregate attachment points of at least 110 percent of expected claims.

The Rhode Island proposal would prohibit stop-loss policies from being sold to groups with 50 or fewer lives with aggregate attachment points lower than the greater of $15,000 times the number of groups members; 130 percent of expected claims; or $20,000. And like the Minnesota bill, the Rhode Island measure would not allow stop-loss policies to be sold to groups with 51 or more lives that have annual attachment points lower than 110 percent of expected claims.

The Minnesota bill would only apply to stop-loss policies issued or renewed after July 1, 2012, while the Rhode Island legislation would apply to policies issued on or after Jan. 1, 2014.

The Minnesota legislation would give the state insurance commissioner the authority to amend the dollar amounts yearly based on the medical portion of the consumer price index. No such escalation feature is included in the Rhode Island proposal.

In a position paper, SIIA said that it “has long maintained the position that stop-loss insurance is not health insurance and any attempts to regulate it as such would affect the administration of self-insured group health plans and should therefore be pre-empted by ERISA.

“SIIA opposes efforts to tax stop-loss insurance,” the paper adds.


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