Regulating stop-loss coverage may be needed to deter self-insuring small employers from undermining market reforms

Health Affairs

Volumn 31, Issue 2, 2012, Pages 316-323

  Hall, Mark A ^a  

^a WAKE FOREST SCHOOL OF MEDICINE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ACT; ARTICLE; AUTHORITY; CONSUMER; CONSUMER ADVOCACY; EMPLOYER; GOVERNMENT; HEALTH CARE COST; HEALTH CARE POLICY; HEALTH CARE SYSTEM; HEALTH INSURANCE; HUMAN; MARKET; STOP LOSS COVERAGE;

GOVERNMENT REGULATION; HEALTH BENEFIT PLANS, EMPLOYEE; HUMANS; INSURANCE COVERAGE; PATIENT PROTECTION AND AFFORDABLE CARE ACT; RISK MANAGEMENT; STATE GOVERNMENT; UNITED STATES;

EID: 84858603634     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.2011.1017     Document Type: Article

References (38)

1. Insurer overhead and profits are not eliminated, however, because selffunded employers still hire insurers or other third parties to administer claims, and because many selffunded employers still purchase stop-loss insurance, as discussed in the text. Also, self-insurance arrangements are complex and risky, so they require employers to pay for expert assistance.
2. Brin DW (Dow Jones Newswires, Philadelphia, PA). DJ in the pipeline: self-insurance may be winning small businesses [Internet]. Kennebunk (ME): Mark Farrah Associates; 2011 Mar 22 [cited 2012 Jan 15]. Available from: http://www.markfarrah.com/press.asp?article=91
3. Jost TS (Washington and Lee University, Lexington, VA). The Affordable Care Act and stop-loss insurance. Statement to the NAIC ERISA (B) subgroup [Internet]. Washington (DC): National Association of Insurance Commissioners; 2011 [cited 2012 Jan 15]. Available from: http://www.naic.org/documents/committees_b_erisa_110908_jost.pdf
4. Jost TS (Washington and Lee University, Lexington, VA). Health insurance exchanges and the Affordable Care Act: eight difficult issues [Internet]. New York (NY): Commonwealth Fund; 2010 Sep [cited 2012 Jan 15]. Available from: http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Sep/1444_Jost_hlt_ins_exchanges_ACA_eight_difficult_issues_v2.pdf
5. Eibner C, Price CC, Vardavas R, Cordova A, Girosi F. Small firms' actions in two areas, and exchange premium and enrollment impact. Health Aff (Millwood). 2012;31 (2):324-31.
6. Curtis R, Neuschler E. Smallemployer (" SHOP" ) exchange issues [Internet]. Washington (DC): Institute for Health Policy Solutions; 2011 May [cited 2012 Jan 15]. Available from: http://www.healthexchange.ca.gov/Documents/Small%20Employer%20(SHOP)%20Exchange%20Issues.pdf
7. FMC Corp. v. Holliday, 498 U.S. (1990).
8. See, for instance, Edstrom Industries v. Companion Life Ins, 516 F.3d 5546 (7th Cir. 2008) (opinion by Judge Posner reviewing decisions by other courts).
9. General Motors v. California State Bd. of Equalization, 815 F.2d 1305 (9th Cir. 1987).
10. Fidelity Security Life Ins. v. Director of Revenue, 32 S.W.3d 527 (Mo. 2000).
11. Lewin Group (Falls Church, VA). Establishing an analytical framework for measuring the role of reinsurance in the health insurance market [Internet].Washington (DC): Department of Health and Human Services; 1997 Mar [cited 2012 Jan 15]. Available from: http://aspe.hhs.gov/health/rensurnz/hreinsur.htm
12. McDaniel v. North American Indemnity, No. 02-cv-422, 2008 WL 1336832 (S.D.Ind. Apr. 8, 2008).
13. American Trust Administrators, Inc. v. Sebelius, 44 P.3d 1253 (Kan. 2002).
14. Department of Labor. Advisory opinion 2003-03A [Internet]. Washington (DC): Department of Labor; 2003 Feb 13 [cited 2012 Jan 15]. Available from: http://www.dol.gov/ebsa/regs/aos/ao2003-03a.html
15. The relevant statutory citations are Del. Code Ann. Sec. 18-7218; NY Ins. Law secs. 3231 and 4317; and Or. Rev. Stat. sec. 742.065. Delaware's restriction applies only to groups less than fifteen, and only to stoploss sold by insurers that also market small-group coverage.
16. N.C. Gen. Stat. sec. 58-50-130(a)(5).
17. The association's level was $20,000. Maryland's level started at $25,000 and then was reduced to $10,000. American Medical Security Inc. v. Bartlett, 111 F.3d 358 (4th Cir.1997).
18. For instance, Bill Gray Enterprises v. Gourley, 248 F.3d 206 (3rd Cir. 2001).
19. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985).
20. N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).
21. Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 723 (2d Cir.), rev'd on other grounds, 514 U.S. 645 (1994).
22. The court did not consider it necessary to address the related argument that by targeting employers, this law violated ERISA's "deemer clause."
23. Korobkin R. The battle over selfinsured health plans, or "one good loophole deserves another." Yale J Health Policy Law Ethics. 2005; 5(1): 89-136.
24. Butler P. ERISA preemption manual for state health policy makers [Internet]. Washington (DC): National Academy for State Health Policy; 2000 Jan [cited 2012 Jan 15]. Available from: http://www.nashp.org/sites/default/files/ERISA_Manual.pdf
25. Md. Code. Health Ins, sec. 15-129 (2010).
26. Kentucky Assn. of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003) (suggesting that a $500 stop-loss would permit direct regulation of self-insured employer).
27. The Fourth Circuit decision, for instance, said that "state insurance regulation may not directly or indirectly regulate self-funded ERISA plans," and that states may not use "stop-loss insurance policies as a vehicle to impose the requirements... on self-funded ERISA plans.... These effects impermissibly intrude on the relationship between an ERISA plan and its participants and beneficiaries." Those statements were made, however, in the context of a law that aimed to force employers to cover mandated benefits. For other forms of stop-loss regulation, the court was careful to note: "This is not to say that Maryland may not regulate stop-loss insurance policies. Such regulation is clearly reserved to the states." American Medical Security, Inc.; Client First Brokerage Services, Inc.; Maran, Inc.; Trio Metal Products Co., Inc.; United Wisconsin Life Insurance Co. v. Dwight K. Bartlett, III, in his capacity as Insurance Commissioner of the State of Maryland; National Association of Insurance Commissioners; National Employee Benefits Institute; Self-Insurance Institute of America, Inc., 111 F.3d 358.
28. See, for instance, Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (4th Cir. 2007).
29. Patient Protection and Affordable Care Act of 2010, PL 111-148, sec. 1563(e).
30. Patient Protection and Affordable Care Act of 2010, PL 111-148, sec. 1254(a).
31. Another argument might be that the Affordable Care Act itself discourages self-insurance by declaring that this coverage fails to constitute "eligible employer-sponsored" coverage that will satisfy the individual mandate. Section 1501(b) defines this eligible employer coverage to consist of "a group health plan or group health insurance coverage....offered in the small or large group market within a State." As Amy Monahan and Daniel Schwarcz explain, if the "offered in" clause modifies both "group health plan" and "group health insurance," then self-insured plans would never constitute an "eligible employer sponsored plan" and would therefore never satisfy an individual's obligation under the socalled individual mandate, because the Affordable Care Act defines the small and large group markets in a way that clearly excludes self-insured plans. Monahan A, Schwarcz D. Will employers undermine health care reform by dumping sick employees? Va L Rev. 2011;97(1):125-97. It is highly unlikely, however, that Congress intended this exclusion, and therefore that the Department of Health and Human Services will adopt this interpretation.
32. See, for instance, Patient Protection and Affordable Care Act of 2010, PL 111-148, Title I, Subtitle D, Part 3 (State Flexibility Relating to Exchanges), and Part 4 (State Flexibility to Establish Alternative Programs)
33. Employee Retirement Income Security Act of 1974, PL 93-406, sec. 514(d).
34. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983).
35. Department of Labor. Filing requests for ERISA advisory opinions [Internet]. Washington (DC): Department of Labor; 1976 [cited 2012 Jan 15]. Available from: http://www.dol.gov/ebsa/regs/aos/ao_requests.html
36. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984).
37. For instance, in connection with section 9014 of the Affordable Care Act, which limits to $500,000 the deductibility of employee compensation by health insurers, the Internal Revenue Service has requested comments on whether there are "stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." Internal Revenue Service. IRS notice 2011-02 [Internet]. Washington (DC): IRS; 2011 Jul [cited 2012 Jan 15]. Available from: http://www.irs.gov/pub/irs-drop/n-11-02.pdf. Similarly definitions of selfinsurance will be needed to implement the Affordable Care Act's riskadjustment mechanism (which does not extend to self-insured plans) and its tax on health insurers (which excludes self-insured plans).
38. See, for instance, Patient Protection and Affordable Care Act, PL 111-148, secs. 1301, 1343.