H.R. 1304 clarifies that federal regulators cannot redefine “stop-loss” insurance as “health insurance coverage” under federal law. Specifically, the legislation amends the Employee Retirement Income Security Act of 1974 (ERISA), the Public Health Service Act (PHSA), and the Internal Revenue Code (Code) to continue allowing employers to utilize stop-loss insurance coverage, a financial risk-management tool, when offering employees health care coverage through a self-funded plan. The bill does not restrict the regulation of stop-loss insurance at the state level.
An employer who self-funds provides for employees’ medical costs by paying providers directly or reimbursing employees as claims arise. This occurs instead of paying a fixed premium to an insurance company. In these circumstances, a trust is typically set up to fund such claims. Self-insured employers are responsible for employees’ health care expenses, and they have the flexibility to customize the design of their health plans to meet the specific needs of their workforce.
Some employers who self-insure purchase stop-loss insurance as a financial risk management tool to protect against catastrophic claims. Stop-loss coverage reimburses a self-insured sponsor for medical claims that exceed a certain pre-established level of liability, but it does not insure employees or reimburse medical providers for care.
Stop-loss insurance is regulated at the state level, but not the federal level. The previous administration repeatedly signaled interest in regulating stop-loss insurance as health insurance under ERISA, the PHSA, and the Code, potentially forcing many employers to decide between offering self-insured employee benefits and offering a potentially more expensive fully-insured health care plan. H.R. 1304 will ensure the federal government cannot regulate stop-loss insurance, protecting access to flexible and affordable health care coverage.