RS C.S.H.B. 2090 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 2090 By: Averitt 4-25-97 Committee Report (Substituted) BACKGROUND Self-funded (ERISA) insurance plans are subject to federal law. These plans are designed for the purposes of risk sharing between an employer and an insurance company. An employer purchases stop-loss insurance, which sets an attachment point (dollar amount) at which the employer's financial responsibility for a covered employee is met (much like a deductible), and the insurance company takes responsibility. Because there is no minimum attachment point, insurers can offer stop-loss insurance plans that look and behave like standard plans when the attachment point per participant is at a low level, for example, $250. Some insurance companies use this type of insurance as a loophole to circumvent small group reform efforts that were enacted in the 73rd and 74th legislatures. These recent reforms are working well and must be protected. PURPOSE H.B. 2090 will establish a $5000 minimum individual attachment point for self-funded plans. Once an employer has paid $5000 in medical expenses for an employee (plan participant), the insurer becomes liable for additional medical expenses. With this minimum individual attachment point in place, small group insurance market reform will be protected from abuse. A $5000 individual attachment point will ensure that self-funded plans are legitimate risk-sharing arrangements and not a gimmick to circumvent public policy. All existing policies will be grandfathered in order to avoid any disruption in the market. RULEMAKING AUTHORITY It is the committee's opinion that express rulemaking authority is granted to the Commissioner of Insurance in SECTION 1 of the bill (Sec. 4., Article 21.29, Subchapter E, Chapter 21, Insurance Code). SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter E, Chapter 21, Insurance Code by adding Article 21.29 as follows: Art. 21.29 STOP-LOSS INSURANCE Sec. 1. - DEFINITIONS. Defines "Aggregate attachment point," "Expected claims," "Individual attachment point," "Plan participant," "Self-funded health plan," and "Stoploss insurance." Sec. 2. - APPLICATION OF ARTICLE. Applies to stop-loss insurance that due to low level at which insurer's liability attaches serves the same function as conventional group accident and health insurance policies. This does not apply to employers or self-funded health plans. Sec. 3. - APPLICABILITY OF INSURANCE LAWS TO STOP-LOSS INSURANCE POLICIES. (a) Article applies to insurer subject to Chapter 8, 18, or 19 of this code, and every life, health, and accident insurer governed by Chapter 3 and 20, Insurance Code, that is authorized to issue stop-loss insurance. (b) An insurer may not issue, deliver, or use a stop-loss in this state unless the policy form has been filed with and approved by Art. 3.42, Insurance Code. (c) Each provision of this code that applies to a policy or certificate of group accident and health insurance shall apply to a policy of stop-loss insurance that is issued after September 1, 1997 and has an attachment point below $5,000, and has an aggregate attachment point lower than 110% of expected claims. (d) A stop-loss policy issued prior to September 1, 1997, and subsequently renewed will be grandfathered from this article and remain applicable to the law as it applied prior to the effective date of this article. Sec. 4. - RULEMAKING AUTHORITY. The commissioner may adopt rules as necessary to implement this article. SECTION 2. - This act shall take effect on September 1, 1997. SECTION 3. - Emergency Clause COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2090 strikes Subsection (c) of Section 3 and replaces with new Subsection (c) to update numbering and delete provision of applicability to a stop-loss insurance policy that is issued or renewed on or after September 1, 1998 and has an attachement point of less that $10,000 found in Subsection (c)(2) of original bill. Other changes are non-substantive.