Sep 26, 2017

More on Self-Funded v. Insured ERISA Plans


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11/17/2008
Brian S. King
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Since my last blog post from a couple of days ago, I had a chance to go back and read a very good blog post from my friend Roy Harmon from back in April on the issue of ERISA preemption and how self-funded match up with insured plans.  Roy and I disagree about how so called "hybrid" ERISA plans should be treated for preemption purposes.  But as I read his post, I wonder if we aren't just ships passing in the analytical night. 

The point that neither of us address squarely in our posts is the identity of the insured party.  If the group being insured is the ERISA plan and not the employer sponsoring the ERISA plan, it doesn't seem to me that the analysis is different as to whether the plan is fully or only partially insured.  My analysis that the savings clause dictates that any portion of a particular claim that is paid through insurance is subject to state insurance law is sound. 

On the other hand, if the group being insured is the employer , the sponsor of the plan, rather than the ERISA plan itself, why would the savings clause apply to either the fully insured or stop loss insurance scenario at all?  The employer in both cases is completely responsible for funding the plan and the only difference is whether the employer funds it by purchasing a policy for all claims rather than with a stop loss policy for only a portion of the claims.  Yet, I've never seen anyone argue that if an employer, rather than the plan, is the insured entity under a group insurance policy for every claim made against the plan from dollar one, that group insurance policy falls under the deemer clause and is not subject to state insurance regulation.  Why is that?  Wouldn't it clearly be in the interest of both the insurer and the employer to make that argument?  

Over to you Roy.   



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2 Comments to "More on Self-Funded v. Insured ERISA Plans"

In fact Don, insurers who market policies to other insurers or other business entities, like stop loss insurers, are subject to state insurance regulation, albeit directed to stop loss or excess loss carriers, not to carriers selling to the general public. So I think you are correct.
Posted by Brian S. King on November 17, 2008 at 01:47 PM
Brian:
The employer would still be incurring insurance risk, under the definitions of risk sharing and risk distribution.
It is the type of insurer that is important to define, not whether or not it is an insurer.
According to ERISA, a single employer who self-funds is not in the "business of insurance."
This means, in my opinion, that the insurer is a non commercial insurer, who does not sell to the public.
Why shouldn't a non commercial insurer be subject to state regulation, albeit not as stringet as an insurer who sells to the public?
Don Levit
Posted by Don Levit on November 17, 2008 at 01:47 PM

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