This Act clarifies that employer stop-loss insurance policies protecting self-insured health plans from catastrophic claims are not subject to standard health insurance regulations under federal law, preempting conflicting state laws.
Robert Onder
Representative
MO-3
The Self-Insurance Protection Act clarifies that stop-loss insurance purchased by self-insured group health plans is not considered standard health insurance coverage under federal law. This ensures that these policies, which protect employers against catastrophic claims, remain available to plan sponsors. Furthermore, the Act establishes federal preemption, preventing state laws from interfering with a group health plan's ability to obtain this crucial risk protection.
Federal Bill Moves to Keep 'Stop-Loss' Insurance Out of Standard Health Coverage Rules
If your employer offers health insurance, chances are they’re paying for it in one of two ways: either they buy a fully insured plan from a carrier like Blue Cross, or they decide to self-insure, meaning they pay the medical bills directly out of company funds. The Self-Insurance Protection Act is all about the second group, making specific changes to how self-insured plans manage their biggest financial risk.
The Boss’s Insurance Policy, Explained
This bill (SEC. 3) clarifies that when a self-insured employer buys “stop-loss insurance,” that policy is not considered standard “health insurance coverage” under the federal ERISA rules. Think of stop-loss as catastrophic insurance for the company’s budget, not for your personal health. It only kicks in when the total claims paid by the employer go way over a pre-set limit—say, $250,000 per employee in a year. The bill emphasizes that this policy is only meant to pay the plan sponsor back for massive, unexpected losses, not to cover the employee directly. This reclassification provides regulatory certainty for employers and the insurance companies selling these policies, ensuring they aren’t accidentally subjected to consumer protection rules meant for standard health plans.
Overriding the State Regulators
The biggest pivot in this legislation is found in Section 4, which introduces federal preemption. Currently, states have some authority to regulate stop-loss policies, often setting rules on how high the employer’s deductible (the “attachment point”) can be before the stop-loss coverage kicks in. This bill overrides any state law that might restrict a self-insured plan from getting insurance against high or unexpected claim losses. Essentially, the federal government is stepping in to ensure that states can’t block employers from buying this financial protection.
What This Means for Your Wallet and Coverage
For the average person, this bill doesn’t directly change your co-pays or deductibles, but it affects the financial stability of the plan you rely on. By ensuring employers can easily access stop-loss insurance, the bill helps keep self-insured plans viable, which is good for employers trying to manage costs. However, by explicitly removing stop-loss from the definition of “health insurance coverage,” and by preempting state regulation, the bill also removes a layer of consumer protection.
This matters because states often step in to prevent employers from buying stop-loss policies with extremely high attachment points—say, a $500,000 deductible per employee. If the employer sets that threshold too high, the plan itself might go broke trying to pay a massive claim before the stop-loss kicks in. By overriding state authority, the bill makes it easier for employers to purchase riskier stop-loss policies, potentially leaving the underlying health plan—and by extension, the employees relying on it—more exposed to catastrophic financial risk if the plan isn't managed carefully. This tradeoff is the core of the bill: more regulatory freedom for employers, but less oversight from state insurance watchdogs.