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States could soon try to give employers that use level-funded plans more help with avoiding big, unexpected bills.
A team of regulators at the National Association of Insurance Commissioners hinted at that possibility this week.
Small and midsize employers are shifting rapidly toward use of "level-funded plans," or plans that combine self-insurance with low-limit stop-loss insurance.
The ERISA and Alternative Health Coverage Working Group formed a group that will draft a batch of level-funded plan "guidance," or advice for regulators about how to use existing laws and regulations to protect the plan sponsors.
The working group is part of the NAIC's Regulatory Framework Task Force, which, in turn, is part of the NAIC's Health Insurance and Managed Care Committee.
The working group talked about the drafting project Tuesday, during an in-person session at the NAIC's spring national meeting in San Diego, according to meeting summaries posted on the websites of the working group and the task force.
Members of another NAIC Health Insurance and Managed Care Committee working group, the Consumer Information Working Group, are also talking about concerns about level-funded plans, according to draft minutes for an online working group meeting that took place March 4.
Martin Swanson, a regulator from Nebraska, noted that more employers are using level-funded plans, and that some are "running into difficulty and leaving employers with unexpected costs," according to the draft minutes.
He suggested that the working group should consider adding information about level-funded plans to its guide for shopping for health coverage.
Level-funded plan basics: An employer with a level-funded plan agrees to self-insure the plan.
The stop-loss is set up in such a way that it may keep the employer's monthly spending relatively stable when claims are high.
Instead of paying much more when claims are high, the employer may get cash back later if claims are low.
In 2023, about 38% of the workers in U.S. health plans with fewer than 200 covered workers were in level-funded plans, according to KFF.
Related: NABIP urges regulators to standardize level-funded health plans
Level-funded plans have served as a refuge from big rate increases in the market for fully insured small-group health coverage.
But providers of stop-loss insurance appear to be facing increases in care use rates and care prices that are comparable to the increases facing managers of fully insured coverage.
One problem employers with level-funded plans face is that, in some cases, they may have to pay the plan participants' medical bills themselves and then seek reimbursement from the stop-loss insurer, rather than having the stop-loss insurer advance funds automatically, according to an analysis posted by Hall Benefits Law.
Another problem is that employers may get less help from provisions such as prescription drug rebates than they expect, the firm says in the analysis.
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