State Regulation/Taxation of Stop Loss
Should states be authorized to regulate stop-loss insurance as health insurance by (1) regulation of minimum stop-loss attachment points; (2) assessments on stop-loss policies in connection with state high-risk insurance programs; and (3) the requirement in certain states that stop-loss insurers also comply with insurance mandates.
In spite of recent court decisions declaring violation of ERISA preemption statutes, states have begun enacting laws which attempt to regulate stop-loss insurance policies as health insurance policies and impose assessments on stop-loss insurance in connection with their high-risk insurance programs. Stop-loss insurance protects employers who sponsor self-insured group health plans and does not provide coverage to individuals. Therefore, classifying it as health insurance is clearly a stretch. The trend by states to unlawfully tax and regulate stop-loss insurance is continuing.
Assessments are typically being made to help finance deficits in states’ high-risk insurance programs or failed small group reforms undertaken by state governments. Neither stop-loss insurers nor traditional group health insurers should be bailing out these failed programs. To do so is to place a penalty on those who are keeping people out of the state risk pools by providing a wide range of benefits and the result is double taxation on the employer community.
SIIA has developed its own industry “model act” which proposes to regulate stop-loss as a separate class of insurance (stop-loss) rather than as health insurance under state law and will continue to seek opportunities with selective legislators to introduce and adopt the SIIA model at the state level.
The primary advocates of stop-loss regulation are Blue Cross/Blue Shield, National Association of Health Underwriters and National Association of State Comprehensive Health Insurance Programs (NASCHIP). SIIA is the main industry group that opposes such regulation.
SIIA 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 preempted by ERISA. SIIA opposes efforts to tax stop-loss insurance.
The battle against state assessments on employer stop-loss insurance is expected to continue as has law makers across the country convene for the 2007 legislative year. Currently North Carolina, Missouri, and Georgia have proposals that would assess stop-loss insurers.