New Texas Medical Stop Loss Rules Considered – Growing Government Interference In Health Care


The Texas Department of Insurance (“TDI”) has drafted new and potentially transformative rules relating to medical stop-loss insurance policies issued in connection with self-funded employer health benefit plans.

New Texas Medical Stop-loss Rules Drafted by Texas Department of Insurance – Comments Deadline: Nov 16, 2015

MyHealthGuide Source: Christopher L. Martin and Jon Gillum, 10/28/2015, Locke Lord LLP

Within an environment of increased federal and state regulatory emphasis on health insurance related issues arising due to the passage by the U.S. Congress of the Patient Protection and Affordable Care Act of 2010, the Texas Department of Insurance (“TDI”) has drafted new and potentially transformative rules relating to medical stop-loss insurance policies issued in connection with self-funded employer health benefit plans.

The purpose of the TDI posting is to obtain public and stakeholder input regarding an informal draft of proposed regulatory changes affecting employer health plans. Although many of the proposed changes are of a technical or evolutionary nature for health benefit plans themselves, the most significant proposal may be a new comprehensive regulatory framework contemplated for medical stop-loss insurance policies.

  • With Subchapter F of its draft rules, TDI intends to establish criteria for the specific terms of coverage offered under stop-loss insurance policies issued to employer-sponsored self-funded health benefit plans, confirm that such policies are indeed covered by the Texas Life and Health Guaranty Association and directly regulate insurance forms and policy wording used by insurers for their medical stop-loss insurance products.

TDI’s position has long been that medical stop-loss insurance is considered direct insurance in Texas, as opposed to a form of unregulated reinsurance.
Oversight of Stop-Loss Insurance Expands

The proposed regulations would significantly enhance TDI’s direct oversight of medical stop-loss insurance products and potentially lead to an entirely new regulatory framework for this type of increasingly common insurance coverage.

TDI has included in its proposed regulations newly mandated specific minimum individual and aggregate attachment points which would be required under all medical stop-loss insurance policies offered in the state. By TDI’s definition and consistent with common industry practice, an attachment point represents the amount of liability for claims incurred under an employer’s self-funded employee health benefit plan above which a stop-loss insurer becomes liable for payment to the employer. TDI’s proposed minimums are not without precedent or regulatory context and are broadly consistent with those set forth in the National Association of Insurance Commissioners’ Stop-Loss Insurance Model Act, initially adopted in 1995.

In additional to the mandated minimum attachment points, the proposed regulations contain comprehensive insurance policy form requirements, including (i) required wording provisions, (ii) restrictions on insurer discretion on coverage determinations and eligibility questions, (iii) specific obligations with respect to run-out claims payments, and (iv) detailed requirements for renewal and policy termination provisions. Due to their nature and scope, each of these provisions may prove to be of particular interpretive concern to medical stop-loss insurers operating within the state if the draft proposed rules are eventually adopted.

Comments Invited – Deadline Nov 16, 2015

TDI has invited comment on the informal draft rules and it is expected that both self-insured employers and their medical stop-loss insurer stakeholders will be keenly interested in the ongoing development of TDI’s new regulatory framework for this important insurance product in the State of Texas. Medical stop-loss insurance carriers offering or planning to offer coverage in Texas would be well-advised to stay apprised of developments in this area and may wish to participate in the comment process for the proposed regulations. Texas members of Locke Lord LLP’s insurance practice group will be closely monitoring the progression of the draft proposed rules through the TDI rulemaking process.

A copy of the TDI’s informal draft posting and related notices can be found at the link, and below.

Informal Draft Rules Relating to
Employer-Related Health Benefit Plan Regulations
Title 28 Texas Administrative Code Chapter 26

Comments due by November 16, 2015
The Texas Department of Insurance has prepared informal draft rules that update Chapter 26 Small Employer Health Insurance Regulations. The purpose of posting this draft is to obtain public and stakeholder input regarding proposed changes that will conform it to statutory changes made over several legislative sessions, and to clarify new regulatory requirements, including requirements for stop-loss insurance policies.The draft posting changes the small employer health insurance regulations by changing the title of the chapter to employer-related health benefit regulations since the chapter encompasses more than small employer plans; updating the cooperative rules, including adding that cooperatives are exempt from the Insurance Code Chapter 1370 mandate that a health benefit plan must provide coverage for detection of ovarian and cervical cancer; updating citations and statutory changes in wording, including modifying, adding, or deleting definitions; allowing SERFF filings; adding language to clarify the regulation of employer group waiver plans; adding language to clarify that carriers may not exclude coverage outside the plan service areas for healthcare services, supplies, or drugs provided for sickness, injury, or emergency, but may exclude the coverage if the enrollee travels outside the U.S. for the sole purpose of receiving those benefits; adding language that allows small employer carriers to provide the small employer the option to exclude spousal coverage adding language to clarify regulation of certificates issued to Texas residents under out-of-state group policies; establishing a new subchapter regulating stop-loss insurance; and reducing redundancy in the rules.

Though not  reflected in the informal draft, TDI is also considering the repeal of §26.1, Statement of Purpose; §26.21, Cost Containment; §26.22, Private Purchasing Cooperatives; §26.23, Powers and Duties of Texas Health Benefits Purchasing Cooperative and Private Purchasing Cooperatives; §26.26, Administrative Violations and Penalties; §26.27, Forms; §26.311, Administrative Violations and Penalties; and §26.413, Health Carrier Reporting Requirements. Except for the substance of §26.22 and §26.23 that is being moved to Subchapter D, the sections are duplicative of other state or federal laws. The informal draft repeals Subchapter E, Healthy Texas Program which will complete its phase out process on December 31, 2015.

TDI invites your input on the informal draft rules and repeals, and welcomes your comments on any new costs that you anticipate could result from the draft rules. Staff is particularly interested in public comment on the language that allows small employer carriers to provide the small employer the option to exclude spousal coverage, the revision of the definition of “eligible employee,” whether any particular provision of Chapter 26 should be made inapplicable to  employer group waiver plans, the requirement for SERFF filings, and the stop-loss attachment points.

This is an informal draft posting and not a formal publication for rulemaking.

To expedite the comment period and our process, TDI encourages you to submit your comments on the draft posting by email to; by mail to Doug Danzeiser at Mail Code 107-2A, P.O. Box 149104, Austin, Texas 78714-9104; or by phone at 512-676-6673. You may also provide written or oral comments during the meeting. We request that you submit your comments by 5 p.m. Central time, on November 16, 2015.

TDI will also be hosting a stakeholder meeting to discuss the draft posting on October 30, 2015, from 1 p.m. to 5 pm, Central time, in Room 100 of the William P. Hobby Jr. State Office Building, at 333 Guadalupe Street, Austin, Texas 78701.

TDI has arranged for a conference line to allow you to participate remotely. The conference line will support up to 200 callers. To participate by phone, please call 877-226-9790 on the day of the meeting, and use Access Code 8018458#. Additional information on the stakeholder meeting may be accessed by clicking on the link below.

Thank you for your interest and assistance in this process. A copy of the draft posting may be downloaded from the link below. If you have questions about this notice or the draft posting, please contact Doug Danzeiser, LAH Regulatory Initiatives at

Continue to Draft Posting of: Chapter 26 Employer-Related Health Benefit Plan Regulations

Continue to Meeting Notice: Stakeholder Meeting Information