Law Limits Self-Insured Plans for Small Employers

legal settlementA new law in California, CA SB 161, limits the ability of small employers (under 100 employees) to self-insure their health benefits. Beginning January 1, 2014, insurers cannot issue stop loss insurance with deductibles below $35,000 to groups with one to 100 employees.

The attachment point increases to $40,000 in 2016. (The attachment point is the amount of claim dollars a company will be responsible for paying before the stop loss carrier reimburses any payouts). Also under the law, stop-loss policy cannot exclude any employee or dependent who is eligible for coverage under the employer’s self-funded group health plan.

These restrictions do not apply to stop-loss policies that were in effect for small employers before September 1, 2013. These policies may be renewed or reissued, or a stop-loss policy may be issued by another stop-loss insurer to maintain continuity of stop loss coverage. Also, SB 161 does not affect the ongoing operations of certain multiple employer welfare arrangements if they comply with small group health reforms.

Last Updated 12/01/2021

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