The Self-Insurance Institute of America, Inc. today filed comments with the Internal Revenue Service (IRS) in response to the agency’s request for comments regarding the distinction between health insurance and stop-loss insurance.

As part of the new healthcare law, the IRS is tasked with setting new limits on the tax deduction for executive compensation. The new law also now extends the compensation deductibility limits to employers who sell “health insurance”.

The stop-loss insurance connection is specified in the following excerpt from the IRS notice seeking comments from the public on:

"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2)

So, not only is the IRS asking insurance practitioners how they should treat, for example, stop-loss policies, the Agency is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.

SIIA’s comments letter forcefully argues that stop-loss insurance should not be considered health insurance regardless of attachment point levels. The full text of the letter can be accessed on-line by clicking here.

SIIA lobbyists expect to meet with IRS officials in person in the coming weeks to reinforce the submitted written comments. This is a developing story so watch for additional updates to follow.