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OLR Bill Analysis
sHB 6710
AN ACT CONCERNING ASSOCIATION HEALTH PLANS AND
ESTABLISHING A TASK FORCE TO STUDY STOP -LOSS
INSURANCE.
SUMMARY
This bill establishes a regulatory structure that allows self-funded
and fully insured multiple employer welfare arrangements (MEWAs) to
be sold in Connecticut. In practice, a MEWA is a group of employers
(i.e., “employer members”) that join together (i.e., into a “sponsoring
association”) to provide health benefit plans to the members’
employees.
The bill requires MEWAs to meet certain minimum benefit
standards, including covering the essential health benefits and any state
mandated health insurance benefits and having an actuarial value of at
least 60%. Additionally, self-insured MEWAs must be licensed with the
Connecticut Insurance Department and meet certain fiduciary
requirements. The bill subjects fully insured MEWAs to the large group
health insurance rating requirements, rather than the small group
requirements that apply to certain association health plans under
current law. However, the bill requires both self-funded and fully
insured MEWAs to comply with certain federal laws, which generally
establish minimum consumer protections (see BACKGROUND).
Under the bill, a MEWA is comprised of “employer members,” which
are entities of a sponsoring association that conducts business and
employs people in Connecticut. A “sponsoring association” is an
industry trade group (or another group representing employers in
multiple trades) that (1) is organized and has a written constitution or
bylaws, (2) has at least 50 employer members, and (3) has been
maintained in good faith for at least the preceding five years for reasons 2023HB-06710-R000330-BA.DOCX
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other than providing insurance. Broadly, a fully insured MEWA
purchases insurance from, and transfers risk to, a licensed insurer; a self-
funded MEWA does not purchase an insurance plan and instead
administers a benefit plan itself (i.e., pays claims from its own money).
The bill also establishes a 12-member task force to study whether
stop-loss insurance may impact (1) small group health insurance plans
and their enrollees and (2) medical spending in Connecticut. In practice,
stop-loss insurance protects insureds from catastrophic claims by
covering claims above a pre-set threshold. The bill requires the task
force to report its findings to the Insurance and Real Estate Committee
by February 1, 2024. The task force terminates on that date or when it
submits its report, whichever is later.
EFFECTIVE DATE: October 1, 2023, except the task force provisions
are effective upon passage.
§§ 1 & 2 — SELF-FUNDED MEWAS
The bill prohibits a self-funded MEWA from issuing a health benefit
plan in Connecticut unless it first gets a license from the insurance
commissioner. (The bill does not establish a licensure application,
approval process, or fee.)
Under the bill, a “self-funded MEWA” is a health benefit plan that is
(1) offered by a sponsoring association to provide insurance to its
participating employer members and (2) not fully insured by a
Connecticut-licensed insurer.
Minimum Coverage Requirements
The bill requires self-funded MEWAs that cover one or more
employees of one or more participating employer members to:
1. cover the federal Affordable Care Act’s essential health benefits,
as required by federal law;
2. cover all state mandated health insurance coverage requirements
(i.e., benefit mandates); 2023HB-06710-R000330-BA.DOCX
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3. offer coverage with a minimum of 60% actuarial value, which is
the average percentage of an individual’s health care costs that a
plan pays;
4. cover inpatient hospital services and physician services;
5. not limit or exclude coverage based on preexisting conditions,
which is also a federal law requirement;
6. not discriminate against insureds based on health status for
health benefit plan eligibility, premiums, or contribution
requirements;
7. make health benefit plans available to all employer members,
regardless of any employer or employee health status factors;
and
8. comply with existing law’s utilization review and benefit
determination notification requirements.
Rating Requirements
The bill requires self-funded MEWAs to:
1. set base rates formed on an actuarily sound, modified
community rating methodology that considers the pooling of all
participants’ claims;
2. use each employer member’s risk profile to set premiums by
actuarily adjusting the base rate; and
3. use pooling or reinsurance of individual large claimants to
reduce the adverse impact on any specific employer member’s
premiums.
Plan Design
The bill requires self-funded MEWAs to implement value-based
insurance design and value-based contracting, which may include
centers of excellence, wellness programs, health enhancement
programs, alternative payment models, chronic disease navigation, 2023HB-06710-R000330-BA.DOCX
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patient-centered medical homes, and advanced primary care.
Under the bill, “value-based insurance design” is any material term
in a health insurance policy that is designed to increase the quality of
covered benefits or health care services while reducing their cost.
Trust Requirements
The bill requires a sponsoring association to form a trust to establish
and maintain the health benefit plan. However, the bill prohibits a trust
from including in its name the words “insurance,” “insurer,”
“underwriter,” “mutual,” or any other description of insurance or an
insurance company, unless the context specifies that the trust is not an
insurer or transacting insurance. Additionally, all health benefit plan
documents a self-funded MEWA issues must include the following
statement on the first page in bold 14-point type:
“This coverage is not insurance and is not offered through an
insurance company. This coverage is not required to comply with
certain federal market requirements for health insurance, and is not
required to comply with certain state laws for health insurance. Each
employer member shall be liable for such employer member’s
allocated share of the liabilities of the sponsoring association under
the health benefit plans as determined by the board of trustees. Each
employer member may be responsible for paying an additional sum
if the annual premiums present a deficit of funds for the trust. The
trust’s financial documents shall be made available upon request by
a participant in the health benefit plan.”
The trust is authorized to sell health benefit plans to the employer
members if the trust:
1. is subject to ERISA (the Employee Retirement Income Security
Act) and any regulations or standards the U.S. Department of
Labor (DOL) prescribes related to MEWAs; and
2. annually files Form M-1 with DOL (DOL requires MEWAs to file
this form, which generally identifies the sponsoring association
and has a description of the plans it offers). 2023HB-06710-R000330-BA.DOCX
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The bill requires the trust’s organizational documents to:
1. state that the trust is sponsored by the sponsoring association;
2. state that the trust’s purpose is to provide health care benefits,
including medical, prescription drug, dental, and vision benefits,
to the members’ employees and their dependents;
3. require that the trust’s funds be used for the participating
employees’ benefit (and the benefit of their dependents) through
(a) self-funding claims or purchasing reinsurance, or a
combination of both, and (b) defraying the health benefit plan’s
administration costs and expenses;
4. limit participation in a health benefit plan to participating
employees of the sponsoring association and their employee
members;
5. implement a process for electing trustees to the board; and
6. require trustees to discharge their duties following commonly
accepted fiduciary standards as the commissioner requires by
regulations.
Board of Trustees
The bill also requires the trust documents to establish and maintain a
board of at least five trustees that have fiscal control over the self-funded
MEWA. Under the bill, the board has the authority to (1) approve
employer member applications to participate in the MEWA and (2)
contract with any licensed administrator or service company to
administer the MEWA’s daily operations (e.g., a third-party
administrator).
The bill requires the board to (1) operate any health benefit plan
following generally accepted fiduciary standards as the commissioner
adopts in regulations and (2) have the authority to enforce and collect
special assessments against employer members.
Minimum Reserves 2023HB-06710-R000330-BA.DOCX
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The bill requires the trust to establish and maintain reserves
calculated according to (1) the National Association of Insurance
Commissioners Accounting Practices and Procedures Manual
requirements and (2) any financial and solvency regulations the
commissioner adopts.
Stop-Loss Insurance
Under the bill, a trust must purchase and maintain stop-loss
insurance with retention levels set in keeping with actuarial principles
from Connecticut-licensed insurers.
Fiduciary Liability Insurance and Bond
The bill also requires the trust to purchase and maintain:
1. commercially reasonable fiduciary liability insurance from a
Connecticut-licensed insurer and
2. a bond, in a form and amount the commissioner approves.
Employer Member Liability
The bill makes each employer member liable for their allocated share
of the sponsoring association’s benefit plan liabilities, as the board of
trustees determines.
Fully Insured Exemption
The bill regulates fully insured MEWAs separately (see below). As
such, it specifies that the provisions above do not apply to them.
Regulations
The bill authorizes the commissioner to adopt implementing
regulations, including requirements for licensing, financial condition
and actuarial standards, solvency and insolvency, transparency and
reporting, and filing.
§§ 1, 3 & 4 — FULLY INSURED MEWAS
A “fully insured MEWA” is a health benefit plan (1) offered by a
sponsoring association to provide insurance to the participating
employers’ employees and (2) funded through an insurance policy 2023HB-06710-R000330-BA.DOCX
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purchased from a Connecticut-licensed insurer.
Constitution and Bylaws (§ 3)
The bill requires a sponsoring association that sponsors a fully
insured MEWA to have a written constitution and bylaws. These
documents must require the sponsoring association to:
1. hold regular meetings, at least annually, to further its
participating employers’ purposes and
2. collect dues or solicit contributions from the participating
employers.
Minimum Coverage Requirements (§ 3)
A fully insured MEWA must:
1. comply with all pertinent DOL regulations or standards,
2. qualify as a large group market plan subject to (a) all state health
insurance benefit mandates and (b) all large group market
regulations under the federal Public Health Service Act (see
BACKGROUND) ,
3. adhere to all federal Affordable Care Act requirements applicable
to large group plans,
4. not limit or exclude coverage for individuals based on
preexisting conditions,
5. cover the Affordable Care Act’s essential health benefits,
6. offer coverage that meets at least a 60% actuarial value, and
7. be available only to the MEWA’s participating employers.
Fully Insured MEWAs as Large Employers (§ 4)
Current law allows an association health plan to provide health
insurance to small employers subject to the small employer rating
requirements. Insurance Bulletin HC-123 defines a “small employer” as
between one and 50 employees (excluding sole proprietors). 2023HB-06710-R000330-BA.DOCX
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The bill repeals this option for an association health plan to offer
small group coverage. Instead, the bill subjects fully insured MEWAs to
the large group requirements.
Among other things, this exempts fully insured MEWAs from
requirements related to:
1. guaranteed issue and renewability (although the federal
Affordable Care Act requires group insurers to offer coverage on
both a guaranteed issue and guaranteed renewal basis) and
2. certain rating requirements, including that the association must
be rated as a single pool, but may be adjusted by age and
geographic area, as well as by actuarily justified differences in
plan design, provider network, and administrative expenses.
§ 5 — STOP-LOSS INSURANCE TASK FORCE
The bill establishes a 12-member task force to study the structure of
stop-loss insurance plans, including the impact they might have on (1)
small groups and their enrollees, and (2) medical spending in
Connecticut. For the purposes of this task force, a “small group” is an
employer or other stop-loss purchaser with less than 100 employees or
members and a “stop-loss insurance plan” is an insurance policy
purchased by an employer, insurer, MEWA, or other provider of self-
funded or fully insured group health coverage in Connecticut that limits
the financial risk of medical claims.
The task force must make recommendations about:
1. how to ensure access to affordable health care services to stop-
loss insurance purchasers and their enrollees;
2. any financial impact that stop-loss insurance plans may have on
small groups in Connecticut, enrollees and their family members,
and the fully insured health insurance market in Connecticut;
3. the appropriate role of stop-loss insurance plans in this state; and
4. consumer protections for small groups and their enrollees and 2023HB-06710-R000330-BA.DOCX
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the enrollees’ family members covered by stop-loss insurance
plans in this state.
Task Force Members
Under the bill, the task force consists of the following members:
1. two members appointed by the House speaker, one representing
a small group in Connecticut using stop-loss insurance, and the
other representing a small group not using stop-loss insurance;
2. two members appointed by the Senate president pro tempore,
one who has experience managing employee benefits and is
knowledgeable about stop-loss insurance in Connecticut, and the
other who is a Connecticut-licensed insurance producer with
knowledge of stop-loss insurance;
3. one Connecticut-license physician appointed by the House
majority leader;
4. one representative of a health equity advocacy organization,
appointed by the Senate majority leader;
5. one Connecticut Association of Health Plans representative,
appointed by the House minority leader;
6. one Connecticut Business and Industry Association
representative, appointed by the Senate minority leader;
7. the Healthcare Advocate or his designee; and
8. three members appointed by the governor, one representing a
labor organization, one representing an insurer licensed to issue
stop-loss in Connecticut, and one representing a consumer
advocacy organization.
The bill requires the appointing authorities to make their initial
appointments within 30 days of the bill’s passage and fill any vacancies.
Task force members must select one or two chairpersons from among 2023HB-06710-R000330-BA.DOCX
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the members. The chairperson(s) must schedule the first meeting of the
task force, which must be held within 60 days of the bill’s passage.
Under the bill, the Insurance and Real Estate Committee staff serve
as the task force’s administrative staff.
BACKGROUND
Federal ERISA, Title 1
Although self-funded (also called self-insured) health benefit plans
are generally exempt from state regulation, federal law explicitly allows
states to regulate self-funded MEWAs as long as state law does not
violate Title 1 of ERISA. Title 1 of ERISA imposes several requirements
on self- and fully insured plans, including requiring the plan to:
1. provide summary plan documents to enrollees;
2. meet certain fiduciary standards and requirements relating to
plan administration;
3. provide certain remedies for participants who believe the plan
has violated ERISA requirements;
4. provide continuation of coverage (i.e., COBRA) benefits;
5. prohibit discrimination based on preexisting conditions;
6. provide special enrollment periods to eligible individuals;
7. prohibit charging individuals higher premiums based on health
factors;
8. include guaranteed renewability provisions; and
9. cover specified benefits (e.g., maternity and newborn benefits,
mental health parity, breast reconstruction).
ERISA Title 1 also incorporates certain Affordable Care Act market
reforms, which apply the Public Health Services Act (42 U.S.C. 2791) to
the large group market. For fully insured MEWAs, this includes an 85%
medical loss ratio. 2023HB-06710-R000330-BA.DOCX
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COMMITTEE ACTION
Insurance and Real Estate Committee
Joint Favorable Substitute
Yea 9 Nay 3 (03/14/2023)