During the NAIC 2012 Fall National Meeting, a proposal to amend the NAIC’s Stop Loss Insurance Model Act to increase the minimum individual attachment point – the equivalent of a “deductible” – for stop loss insurance from $20,000 to $60,000, as well as changes to aggregate attachment points, was defeated by a 10-8 vote. Proponents of the measure were concerned that employers seeking to reduce health insurance cost are utilizing stop loss insurance as a form of standard high-deductible health insurance due to low attachment points without the stop loss insurance being regulated as health insurance. By contrast, some critics of the proposal, such as the Self-Insurance Institute of America, believe higher attachment points will discourage the use of self-insurance programs to address increasing health care insurance costs. As a result, employers may be more likely to discontinue health care insurance plans despite penalties under the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”) forcing employees to turn to the insurance exchanges created under the Affordable Care Act for health care insurance for themselves and their dependents.
The NAIC’s failure to institute higher attachment points has not stopped states from considering their own measures. On February 1, 2013, Bill SB-161 was introduced in the California Senate that would set the individual attachment point as it relates to stop loss insurance at $95,000; on February 14, 2013, Rhode Island Bill H 5459 was introduced proposing to raise the individual attachment point to $60,000; and an amendment to Minnesota’s stop loss insurance laws was recently introduced to raise the individual attachment point from $20,000 to $60,000. All three states have also taken steps to modify minimum aggregate attachment points. Whether the actions by these three states over the last two months are indicative of a movement to higher individual attachment points for stop loss insurance is unclear. However, employers considering self-insurance programs and third party administrators, producers and stop loss insurers should be aware of the distinct possibility of higher attachment points in some states and should closely monitor developments in states where they utilize or offer stop loss insurance in connection with self-insured plans.