Stop Loss Attachment Regulation Triggers Debate at NAIC Summer Meeting

August 11, 2012 -- State regulators continue to focus on stop-loss attachment regulation but a key NAIC working group today put off a vote on approving proposed “guideline revisions” to the current stop-loss model act intended to restrict the ability of smaller employers to obtain stop-loss insurance, citing the need to study the proposal further.

A detailed report from today’s ERISA (B) Working Group meeting in Atlanta follows. This is exclusive original reporting from the Self-Insurance Institute of America, Inc. (SIIA). This is a developing story so please watch for additional SIIA reporting as developments

ERISA (B) Working Group Meeting Report—8/11/12
This meeting was heavily attended, and discussions were spirited. The agenda consisted almost exclusively of discussion of the proposed "Guideline" Amendments to the Stop Loss Insurance Model Act (#92).

Working Group Chair, Christina Goe of Montana, reported on the reasons for making this a "Guideline" amendment rather than an actual amendment to the Model Act. She noted that the new NAIC standards for amending a Model Act require that 1) the subject of the model law necessitates a uniform national standard; and 2) NAIC members are committed to devoting significant resources to promote the adoption of the model in their state.

She further explained that If a proposed model meets these two criteria, then adoption requires a two-thirds majority vote of the NAIC membership. Guidelines simply require a majority vote of the NAIC membership, which was the standard in place when the Model Act was originally adopted in 1995. Nevertheless, many attendees felt that there would not be a practical distinction between a Guideline amendment and an amended Model Act.

The Chair also pointed out that, even if adopted by the ERISA WG, the proposal would have to make its way through the Regulatory Framework (B) Task Force, then through the full Health Insurance and Managed Care (B) Committee, and also the plenary NAIC membership. And finally, as a Guideline amendment, the states would have the option of adopting or not adopting this revised standard.

The ERISA WG handed out a copy of all written comments they have received, including the letter from SIIA. Other comments were received by AHIP, BCBS, Illinois Chamber of Commerce, Heartland Actuarial Consulting, LLC, CIGNA, HCC Life Insurance Company, AIA, and several consumer representatives. They also distributed a memo with their responses to 16 of the most frequently asked questions.

The WG also pointed out that Milliman's original charge was to examine the attachment points to be consistent with the original Coopers & Lybrand report. The actuary (who was present by telephone) also pointed out the distinction between standards for transfer of risk (for example in reinsurance), which are routinely identified, and standards for retention of risk (of which stop loss is a type), which are basically not actuarially in existence.

The Committee made it clear that they did not intend to overstep their charge and did not intend to turn stop loss into health insurance. They also said they do not want to hinder employers from self-funding or from having self-funding options. The proposed change is primarily in response to medical inflation and changes in plan designs since 1995. However, as several people pointed out, this assumes that the original standard of $20,000 was appropriate and made sense, which is probably dubious given that the vast majority of states have yet to adopt the Model Act.

There was a good deal of discussion among the regulators, with predictably varying opinions. At least two state WG members commented that the increase was a "no brainer" and there seemed to be consensus that a change was needed. However, they also clarified that this presupposes that the original limit of $20,000 made sense. There were also state members who stated opposition to the change.

The Committee then opened up the floor for comments from the audience. There were several speakers who voiced opposition to the increase with one consumer representative who spoke strongly in favor of the amendment. After these comments, WG concluded they needed time to do a good deal more study on this subject and would revisit the matter at the next meeting.

The legislative/regulatory environment for self-insurance & alternative risk transfer will be a major topic of discussion at SIIA’s upcoming National Conference & Expo, scheduled for October 1-3, 2012 in Indianapolis. More than 1,100 people have already signed up to attend. Complete event information, including registration forms, can be accessed on-line at www.siia.org, or by calling 800/851-7789.