“Agencies have level-funded plans on their radar and may soon seek to define and regulate them differently than traditional self-funded plans.”
In the preamble to the proposed rules, the Agencies recognize that many employers are utilizing level-funded plan arrangements. While “level-funded” is currently not a defined term under ERISA or other applicable federal law, the preamble describes these benefits as arrangements where the plan sponsor makes set monthly payments to a service provider to cover estimated claims costs, administrative costs, and premiums for stop-loss insurance for claims that surpass a maximum dollar amount beyond which the plan sponsor is no longer responsible for paying claims. The Agencies believe that a number of employers with level-funded plans utilize stop-loss insurance to limit the plan sponsor’s financial responsibility.
The proposed regulations do not make any changes regarding level-funded plans, but pose a number of questions about level-funded plans for which they are seeking comments or information, some of which question how sponsors of level-funded plans are complying with applicable laws and regulations, including ACA filing requirements, consumer protection requirements under the ACA through stop-loss insurance, how refunds from stop loss providers are determined and distributed (to participants and/or the plan sponsor), and why these arrangements are becoming increasingly popular.
The goal appears primarily focused on information gathering so that the government may determine how and when to begin regulating these plans in the future.