The Departments of Treasury, Health and Human Services, and Labor are soliciting input from group health plans and their sponsors regarding the use of stop loss insurance. Stop loss insurance protects against catastrophic or unpredictable health insurance claims and provides coverage to self-insured group health plans once a certain level of risk has been assumed by the plan. According to the request for information, the agencies lack sufficient data on the incidence or terms of stop loss insurance among self-insured employers’ group health plans. The concern, as discussed in the request, is that small employers with healthy employees might self-insure and purchase stop-loss insurance policies with relatively low attachment points (the specified dollar amount above which the stop-loss coverage pays for claims) to avoid triggering certain requirements under the Affordable Care Act. According to the agencies, “this practice, if widespread, would 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.”
In order to examine this issue further, the agencies seek responses on the following questions:
- 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)?
- 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?
- 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?
- 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?
- 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?
- 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?
- 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?
- What types of entities issue stop loss insurance? How many small entities issue stop loss insurance policies?
- Do stop loss issuers increase fees for groups below a certain size or exclude those groups? If so, how?
- 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?
- 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?
- 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?
- What impact does the use of stop loss insurance by self-insured small employers have on the small group fully insured market?
Comments must be received on or before July 2, 2012. Comments may be submitted electronically through the federal eRulemaking Portal or via email to: E-OHPSCA-STOPLOSS.EBSA@dol.gov. Written comments may also be sent or hand delivered to: 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.