In the United States, employer-sponsored insurance covers 150 million Americans. In 2016, the Kaiser Family Foundation reported that of those insured under employer-sponsored health plans, 61% of covered workers are enrolled in a plan that is either partially or completely self-funded. Three in five covered workers in fully or partially self-funded plans are in plans with stop loss protection. Therefore, in total stop loss insurance protects health plans that cover approximately 5.5 million people in the US.
Stop Loss Insurance Protects Employers
It is important to note that stop loss insurance is purchased by employers that self-fund their employee health plans, but do not want to assume full liability for losses arising from the plans. It provides employers with a financial solution in the event of catastrophic and/or unpredictable losses.
The past few years have proven to be tumultuous for the stop loss insurance industry as numerous states imposed legislation that introduced limits on self-funded plans and assets. Additionally, the introduction of the Affordable Care Act in 2010 has led to higher management costs, increasingly complex reporting obligations, and decreased agency for self-insured employers. This wave of legislation also limits the amount of stop loss insurance an employer can obtain to protect themselves and their self-insured plans for employees.
If stop loss insurance is no longer an option or significantly weakened, many self-funding employers would be unwilling to accept full risk of a self-funded health insurance plan and would be forced to invest in traditional health plans. This is an issue because the plans would then need to comply with the Affordable Care Act’s mandate to purchase benefits that employers don’t necessarily want to acquire because of additional costs or other reasons.
The Importance of the Self Insurance Protection Act
In a previous post, we explored the Self Insurance Protection Act (SIPA), introduced to Congress as a regulatory solution to these statutory blocks on stop loss insurance. This act was first presented to President Obama’s administration as a sort of beacon to guide the government’s regulation of the increasing prevalence of stop loss insurance. If passed, it would ensure that stop loss insurance is not lumped in with legislation addressing traditional health insurance. This differentiation is critical to the survival of stop loss insurance, as it is a practice that is being recognized as a trailblazer in breaking down the traditional, stringent health care industry into a free-market sphere that drives patient-centered solutions. SIPA would serve in the present as a protection for any regulatory threats in the future.
On April 5th, 2017, the Self Insurance Protection Act passed through the House of Representatives by an overwhelming vote of 400 to 16. This marks a great victory for stop loss insurance and self-insured employers, as it is one step closer to becoming law. The bill will now have to be debated by the Senate, after which it will be passed on to the President to be signed into law. The Senate has read through SIPA twice and has referred to the Committee on Health, Education, Labor, and Pensions. The Senate will most likely need to work through provisions with the House through a conference committee between both groups to come to a consensus before presenting the bill to President Trump for his signature. Naturally, the President may veto the bill, in which case it will bounce back to the Senate and the House. A two-thirds majority overrule would negate the veto and make SIPA a law.
Knowing that the time from introduction to the first hearing on the floor varies greatly and depends on both the urgency of the legislation and its committee sponsors, SIPA could be signed into law anytime between a few weeks or a few months from now. Until then, employers can continue to utilize this important financial risk-management tool that has passed through the House of Representatives to offer employees coverage through their self-funded plans.
If you are a self-funded employer and have any questions on this topic, please contact us to discuss your stop loss insurance coverage and health plans.