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House Passes Bill Blocking Federal Regulation of Stop-Loss Insurance

By Robert Tomilson, Scott B. Galla / Apr 10, 2017

The U.S. House of Representatives passed the Self-Insurance Protection Act (H.R. 1304), on April 5, 2017, in an effort to preclude federal regulation of stop-loss insurance. This Act would not alter regulation of the current stop-loss insurance market, or even the underlying employer-funded health plans. Rather it would pose a hurdle to future efforts - particularly at the federal level - to regulate stop-loss insurance as "health insurance coverage." This Act reaffirms that states, and not the federal government, wield authority to regulate the growing stop-loss insurance market.

Stop-loss insurance encourages employers to self-insure employee benefit health plans by offering employers protection against catastrophic or unexpected losses. Such insurance reimburses employers for costs paid in excess of an individual and/or aggregate self-insured retention and up to the coverage limits. Employers self-fund benefit plans to avoid paying for expensive group health insurance premiums, exercise more control over plan offerings, and avoid certain regulatory requirements. However, if federal regulations rendered stop-loss coverage unavailable or unaffordable, many employers would not self-insure for fear of exposure to catastrophic or otherwise unexpected large losses.

As passed by the House, the Act would amend the definition of "health insurance coverage" to expressly exclude stop-loss insurance in the Employee Retirement Income Security Act, the Public Health Services Act, and the Internal Revenue Code. This definitional change makes clear that states retain regulatory authority over the stop-loss insurance market, though they cannot treat such insurance as "health insurance coverage."

The bill passed by a 400 to 16 vote and heads next to the Senate.

If you have any questions about the content of this alert, please contact Robert Tomilson at rtomilson@clarkhill.com | (215) 640-8550 or Scott Galla at sgalla@clarkhill.com | (215) 640-8512.