Resolution on Stop-Loss Insurance Exposed

The Resolution on Stop-Loss Insurance is listed under ALEC's Health and Human Services Task Force and was included in the 1996 ALEC Sourcebook of American State Legislation. According to ALEC.org, the Resolution was re-approved by the Board of Directors on January 28, 2013. (Accessed on 2/15/2016).

CMD's Bill Summary

This anti-regulatory Resolution is aimed at limiting state regulation of certain insurance plans that had previously "fallen though the cracks" of state and federal law. Many employer-sponsored health plans are self-insured, and many purchase commercial stop-loss coverage to limit significant losses from those plans (similar to an individual purchasing catastrophic insurance). While federal ERISA law preempts state regulations on self-insured employee benefit plans, it has been unclear whether state regulations on stop-loss plans were preempted.

This Resolution stakes out a precarious position in its effort to oppose regulation. Because ALEC claims to be "pro-federalist," it likely does not want to accept federal preemption of state law; at the same time, ALEC wants to oppose regulation of the insurance industry (members of which sit on ALEC's corporate board). The Resolution mentions that small businesses purchasing stop-loss insurance are covered by ERISA, but opposes regulation not on preemption grounds, but for the "preservation of a free-market, voluntary employer-based system."

ALEC Bill Text

Summary

This Resolution encourages state legislators not to support legislation or regulation that would impose arbitrary limits on stop-loss coverages issued to self-funded plans. By guarding against such legislation, the preservation of a free-market, voluntary employer-based health benefit system is maintained.

Model Resolution

WHEREAS, one of five, or 51 million Americans, are enrolled in self-funded health benefit plans, and

WHEREAS, three of four self-funded employers purchase stop-loss coverage for their health benefit plans, and these plans protect consumers by paying in excess of $100 billion in health benefits to employees and their families, and

WHEREAS, one of three small business establishments with fewer than 100 employees self-fund their health benefit plans, which are covered under the Employee Retirement Income Security Act (ERISA), and

WHEREAS, impairment of a free-market, voluntary employer-based health benefit system would potentially result in higher benefit plan costs for employers and higher costs and reduced coverage for employees and their families, and

NOW THEREFORE BE IT RESOLVED, that the {insert state legislative body} encourages state legislators not to support state legislation or regulations that would hurt employees and their families by imposing arbitrary limits on stop-loss coverages issued to self-funded plans, and

BE IT FURTHER RESOLVED, that {insert state legislative body} believes in the preservation of a free-market, voluntary employer-based health benefit system in which employers prudently choose to self-fund health benefits for their employees and their families at financially viable risk retention levels

1996 Sourcebook of American State Legislation