The Texas Supreme Court ruled that stop-loss insurance sold to self-funded employee health benefit plans is “direct insurance in the nature of health insurance” and not reinsurance. As we reported earlier, the Court of Appeals had ruled that such policies were reinsurance beyond the scope of DOI regulation. The issue arose when the Texas DOI discovered, during a routine audit, that American Insurance Company had sold stop-loss policies from 1998-2002 without paying taxes or complying with other regulatory requirements. American argued that employers that self-fund employee health benefit plans are “insurers” engaged in the “business of insurance.” The Texas high court disagreed, holding that, although employers that self-fund health benefit plans in some respects act like insurers, they are not regulated as insurers under the Texas Insurance Code. Further, the court reasoned, ERISA generally precludes the states from deeming such plans to be insurers or engaged in the business of insurance. Texas Dep’t of Ins. v. Am. Nat’l Ins. Co., No. 10-0374 (Tex. May 18, 2012).
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Texas high court holds that stop-loss insurance sold to employee-health plans is not reinsurance
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