EBSA
Notices
Request for Information Regarding Stop Loss Insurance
[ 5/1/2012]
[ PDF]
Federal Register, Volume 77 Issue 84 (Tuesday, May 1, 2012)
[Federal Register Volume 77, Number 84 (Tuesday, May 1, 2012)]
[Notices]
[Pages 25788-25790]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10441]
[[Page 25788]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
DEPARTMENT OF LABOR
Employee Benefits Security Administration
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-9967-NC]
Request for Information Regarding Stop Loss Insurance
AGENCIES: Internal Revenue Service, Department of the Treasury;
Employee Benefits Security Administration, Department of Labor; Centers
for Medicare & Medicaid Services, Department of Health and Human
Services.
ACTION: Request for information.
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SUMMARY: This document is a request for information regarding the use
of stop loss insurance by group health plans and their plan sponsors,
with a focus on the prevalence and consequences of stop loss insurance
at low attachment points. Given the limited nature of data available,
the Departments of Labor, Health and Human Services (HHS), and the
Treasury (collectively, the Departments) invite public comments via
this request for information.
DATES: Comments must be submitted on or before July 2, 2012.
ADDRESSES: Written comments may be submitted to the Department of Labor
as specified below. Any comment that is submitted will be shared with
the other Departments. Please do not submit duplicates. All comments
will be made available to the public. Warning: Please do not include
any personally identifiable information (such as name, address, or
other contact information) or confidential business information that
you do not want publicly disclosed. All comments are posted on the
Internet exactly as received and can be retrieved by most Internet
search engines. No deletions, modifications, or redactions will be made
to the comments received, as they are public records. Comments may be
submitted anonymously.
Comments may be submitted by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov. Follow the
instructions for submitting comments.
Email: E-OHPSCA-STOPLOSS.EBSA@dol.gov.
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: Stop Loss Comments.
Comments received will be posted without change to http://www.regulations.gov and http://www.dol.gov/ebsa, and available for
public inspection in the Public Disclosure Room, N-1513, Employee
Benefits Security Administration, 200 Constitution Avenue NW.,
Washington, DC 20210, including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Beth Baum or Amy Turner, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Russ Weinheimer, Internal Revenue Service, Department of the
Treasury, at (202) 622-6080; Steve Kornblit, Centers for Medicare &
Medicaid Services (CMS), Department of Health and Human Services, at
(410)786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the CMS Web site
(www.cciio.cms.gov), and information on health reform can be found at
http://www.HealthCare.gov.
SUPPLEMENTARY INFORMATION:
I. Background
Stop loss insurance protects against health insurance claims that
are catastrophic or unpredictable in nature \1\ and provides coverage
to self-insured group health plans once a certain level of risk has
been absorbed by the plan.\2\ Stop loss protection allows an employer
to self-insure for a set amount of claims costs, with the stop loss
insurance covering most or all of the remainder of the claims costs
that exceed the set amount, generally referred to as the ``attachment
point.'' Attachment points can be either ``specific'' or ``aggregate.''
Specific attachment points protect the plan against a high claim for
any one individual (e.g., an employer self-insures up to $500,000 in
claims per year for any one enrollee and stop loss insurance covers
claims amounts above the $500,000 attachment point).\3\ Aggregate
attachment points define the maximum dollar amount of claims that an
employer will pay, in total, during a specific period (e.g., an
employer self-insures up to 125 percent of expected claims per year
across all employees and stop loss insurance covers claims amounts
above the 125 percent attachment point).\4\ Stop loss insurance
policies may be purchased by an employer or by the employer's group
health plan.
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\1\ See the Self-Insurance Institute of America Inc.'s
definition of stop-loss insurance at: http://www.siia.org/i4a/pages/Index.cfm?pageID=4549.
\2\ American Medical Security Inc. v. Bartlett, 111 F.3d 358,
360, 361 (4th Cir. 1997)
\3\ See the Self-Insurance Institute of America Inc.'s
definition of stop-loss insurance at: http://www.siia.org/i4a/pages/Index.cfm?pageID=4549.
\4\ Id.
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The Departments have little data on the incidence or terms of stop
loss insurance among self-insured employers' group health plans.
Private-sector employer sponsored health benefit plans that have 100 or
more participants and smaller plans that hold assets in trust generally
are required to file annual reports with the Department of Labor. These
reports, filed on Form 5500, include some information on the plans'
finances, including some information on any stop loss insurance
policies held by the plans. However, the reports do not include
information on the attachment points associated with stop loss
insurance policies or any information on stop loss insurance policies
held by plan sponsors rather than by plans. Additionally, plans with
fewer than 100 participants that employers self-insure using their
general assets (and that do not hold assets in trust) are not required
to file Form 5500 annual reports and as a result, the Departments have
even less information about stop loss coverage for these plans. The
limited information on stop loss insurance policies contained in Form
5500 is summarized in the Department of Labor's Group Health Plans
Reports Abstract of Form 5500 Annual Reports, available at: http://www.dol.gov/ebsa/publications/form5500dataresearch.html#healthplan. The
limited available information suggests that stop loss insurance is
perhaps becoming more common among smaller self-insured plans but
information is not available on the type of stop loss coverage
purchased by plans of various sizes. More specifically, according to
Form 5500 data, between 2000 and 2008, the percentage of group health
plans filing a Form 5500 that reported having stop loss insurance was
in the range of approximately 23 percent to 27 percent for self-insured
plans and approximately 28 percent to 29 percent
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for partially-insured, partially self-insured plans.\5\
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\5\ See Department of Labor's Report to Congress: Annual Report
on Self-Insured Group Health Plans, issued on 04/24/2012, available
at http://www.dol.gov/ebsa/pdf/ACAReportToCongress041612.pdf.
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Unless prohibited by State insurance law, an insurer may offer stop
loss insurance policies with attachment points set low enough such that
the stop loss insurer assumes nearly all the insurance risk. For
example, the attachment point could be set at $5,000 per employee, or
$100,000 for a small group.
Under section 514(a) of the Employee Retirement Income Security Act
(ERISA), State laws that relate to ``employee benefit plans,'' as
defined by ERISA section 3(3), are generally preempted. (Although ERISA
section 514(b)(2)(A) saves State insurance laws from preemption, ERISA
section 514(b)(2)(B) prohibits States from deeming employee benefit
plans to be insurance companies in order to regulate them under
insurance laws.) \6\ As a result, self-insured plans are not subject to
State insurance laws, but insurance policies issued to those plans or
plan sponsors, including stop loss insurance policies, can be regulated
by States if the regulation is directed toward and affects the business
of insurance rather than the relationship between an employee benefit
plan and its participants.
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\6\ Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 373 n.6
(2002) (a State law that regulates insurance--and which is otherwise
saved from preemption--may not be applied to a self-insured ERISA
plan).
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Employers and plans that purchase stop loss insurance generally are
not subject to State health insurance laws including coverage laws,
rating policies, and other State and Federal consumer protections
applicable to health insurance, including certain patient protections
under the Patient Protection and Affordable Care Act (Affordable Care
Act). It has been suggested that some small employers with healthier
employees may self-insure and purchase stop loss insurance policies
with relatively low attachment points to avoid being subject to these
requirements while exposing themselves to little risk.\7\ This
practice, if widespread, could worsen the risk pool and increase
premiums in the fully insured small group market, including in the
Small Business Health Options Program (SHOP) Exchanges that begin in
2014.\8\
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\7\ Kathryn Linehan, Self-Insurance and the Potential Effects of
Health Reform on the Small-Group Market, Issue Brief 840, National
Health Policy Forum (December 21, 2010) available at http://www.nhpf.org/library/issue-briefs/IB840_PPACASmallGroup_12-21-10.pdf, Russell B. Korobkin, The Battle Over Self-Insured Health
Plans, or 'One Good Loophole Deserves Another', Yale Journal of
Health Policy, Law, and Ethics, Vol. 1, 89-136 (2005).
\8\ A recent RAND report predicts that this effect, if any, is
likely to be small. See http://content.healthaffairs.org/content/31/2/324.abstract?sid=412e7755-0eb9-4b79-ac32-d39e6c739d0f. See also
Mark A. Hall, Regulating Stop-Loss Coverage May Be Needed to Deter
Self-Insuring Small Employers From Undermining Market Reforms,
Health Affairs, 31, no. 2 (2012): 316-323.
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In the mid-1990s, the National Association of Insurance
Commissioners (NAIC) and several States expressed concern that the
purchase of stop loss insurance policies with low attachment points
made the self-insured classification a method to circumvent State
insurance regulation. As a result, the NAIC adopted a model law (Model
Act 92-1), which established standards for determining whether an
insurance policy should be treated as a health insurance policy or a
stop loss insurance policy under State law. The model law created
minimum attachment points for stop loss insurance policies.\9\ If the
attachment points exceeded the minimum amount, the policies would be
treated essentially as reinsurance of a self-insured plan. If the
attachment points were below the minimum, the policies would be
classified as health insurance subject to State insurance regulation.
In addition, the model law established distinctly different
requirements for health insurance policies as opposed to stop loss
insurance policies, including different licensing, reporting, policy
form and solvency requirements for insurers issuing the health
insurance policies.
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\9\ Specifically, the 1995 model law prohibited an insurer from
issuing a stop loss insurance policy that had: (a) An annual
attachment point for claims incurred per individual lower than $
20,000; and (b) an annual aggregate attachment point, for groups of
fifty (50) or fewer, that was lower than the greater of: (i) $4,000
times the number of group members; (ii) 120 percent of expected
claims; or (iii) $ 20,000. For groups of fifty-one or more, it
prohibited an annual aggregate attachment point that was lower than
110 percent of expected claims.
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Other interested stakeholders are also monitoring the market for
stop loss coverage with low attachment points.\10\
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\10\ For example, Hall has cautioned that aspects of the
Affordable Care Act could motivate some small businesses with
younger, healthier employees to self-insure and buy relatively
comprehensive stop loss coverage, and that this might increase
premiums for small businesses that purchase insurance. See Mark A.
Hall, Regulating Stop-Loss Coverage May Be Needed to Deter Self-
Insuring Small Employers From Undermining Market Reforms, Health
Affairs, 31, no. 2 (2012): 316-323. Eibner et al. generally conclude
that self-insurance will have little effect on premiums for small
group coverage, but suggest that this conclusion might change if
affordable, attractive stop-loss policies become more available. See
Christine Eibner, Carter C. Price, Raffaele Vardavas, Amando Cordova
and Federico Girosi, Small Firms' Actions in Two Areas, And Exchange
Premium and Enrollment Impact, Health Affairs, 31, no. 2, (2012):
324-331.
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II. Solicitation of Comments
The Departments are requesting comments to contribute to the
Departments' understanding of the current and emerging market for stop
loss products, both generally and with respect to the following
specific areas:
1. How common is the use of stop loss insurance in connection with
self-insured arrangements? Does the usage vary (and, if so, how) based
on the size of the underlying arrangement or based on other factors?
How many individuals, if known, are covered under stop loss insurance
(either nationally or on a state-specific basis)? What are the trends?
Are past trends expected to be predictive of future trends? Is the
Affordable Care Act expected to affect these trends (and, if so, how)?
2. What are common attachment points for stop loss insurance
policies, and what factors are used to determine these attachment
points? What are common attachment points by employer size (e.g., for
plans with fewer than 50, between 50 and 100, or between 100 and 250
employees, and how do these compare to attachment points used by larger
plans)? What are the lowest attachment points that are available? What
are the trends?
3. Are employee-level (``specific'') attachment points more common,
or are group-level (``aggregate'') attachment points more common? What
are the trends? What are the common attachment points for employee-
level and group-level policies?
4. How do insurers work with small employers to integrate stop loss
insurance protection with self-insured group health plans? What kinds
of options are generally made available? Are policies customized to
meet the needs of different employers? How are the attachment points
for a stop loss policy determined for an employer? Do self-insured
group health plans purchase stop loss insurance anticipating that they
will purchase it every year?
5. For a given attachment point, what percentage of total medical
costs incurred by the employees is typically paid for by the employer
and what percentage is typically paid for by the stop loss insurance
policy? How much do the relative percentages vary for different
attachment points? What are the loss ratios associated with stop loss
insurance policies?
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6. What are the administrative costs to employers related to stop
loss insurance purchased for the employers' self-insured group health
plans? How do these costs compare to the administrative costs related
to purchasing a health insurance policy from an issuer?
7. Is stop loss insurance more prevalent in certain industries or
sectors? Are there any minimum employee participation requirements for
a small employer to be offered stop loss insurance?
8. What types of entities issue stop loss insurance? How many small
entities \11\ issue stop loss insurance policies?
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\11\ For this purpose, a small entity is defined as (1) a
proprietary firm meeting the size standards of the Small Business
Administration or (2) a nonprofit organization that is not dominant
in its field.
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9. Do stop loss issuers increase fees for groups below a certain
size or exclude those groups? If so, how?
10. How do stop loss insurers evaluate the plans seeking coverage
and how is this evaluation reflected in the coverage or premiums
offered? Does the profile of the plan have an effect on the attachment
points available?
11. How do States regulate stop loss insurance? In States that are
regulating this insurance, what are the licensing processes and
standards? Have States proposed laws, regulations, or best practices
with regard to stop loss insurance? Do such proposals focus on
attachment points, size of the group, percent of total claims paid by
the stop loss insurer, or other criteria? What are the issues States
face in regulating stop loss insurance?
12. What effect does the availability of stop loss insurance with
various attachment points and other particular provisions have on small
employers' decisions to offer insurance to employees?
13. What impact does the use of stop loss insurance by self-insured
small employers have on the small group fully insured market?
Signed at Washington, DC, this 25th day of April, 2012.
Victoria A. Judson,
Division Counsel/Associate Chief Counsel, Tax Exempt and Government
Entities, Internal Revenue Service, Department of the Treasury.
Signed at Washington, DC this 25th day of April, 2012.
George H. Bostick,
Benefits Tax Counsel, Department of the Treasury.
Signed this 23rd day of April, 2012.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Dated: April 25, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: April 25, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-10441 Filed 4-27-12; 11:15 am]
BILLING CODE 4120-01-P
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