Bulletin No. LH 2008-01: Stop Loss Insurance Coverage aka Excess Loss, Excess Risk Coverage

OKLAHOMA INSURANCE DEPARTMENT STATE OF OKLAHOMA Five Corporate Plaza • 3625 NW 56TH • Suite 100 • OKLAHOMA CITY, OK 73112 • (405) 521-3681 • IN STATE 1-800-522-0071 • FAX (405) 522-3761 BULLETIN No. LH 2008-01 & PC 2008-04 TO: All Life & Health Insurers Licensed in the State of Oklahoma All P&C Insurers Licensed in the State of Oklahoma All Rating and Advisory Organizations All Joint Underwriting Associations All Third Party Administrators Licensed in Oklahoma ATTN: State Filing Division RE: Stop Loss Insurance Coverage aka Excess Loss, Excess Risk Coverage FROM: Oklahoma Insurance Department DATE: June 18, 2008 This bulletin will supersede Oklahoma Insurance Commissioner’s Bulletin 3-20-91 dated March 20, 1991, regarding Stop Loss Insurance Coverage, aka Excess Loss or Excess Risk Coverage, used in conjunction with self-funded employer benefit plans under ERISA. All companies writing stop loss coverage must file their policy forms with the Oklahoma Insurance Department for prior approval. We do not consider these policies to be a form of reinsurance; therefore, they are not exempt from our approval. All Insurers must comply with this bulletin. A Property and Casualty insurer may file an excess loss or risk policy as a contractual liability contract with the Property and Casualty section of the Rate and Form Compliance Division. Such a filing is exempt from prior approval if the requirements of the Commissioner’s Order 07-1190-PMT are met. An Accident and Health Insurer shall file their forms for approval with the Life and Health section of the Rate and Form Compliance Division. The following requirements shall be met for the coverage to be considered a stop loss policy: 1. The policy must be issued to, and insure, the sponsor of the plan, or the plan itself, not the employees, members or participants. 2. Payment by the insurer must be made to the sponsor of the plan or the plan itself, not the employees, members, participants, or providers. 3. The individual stop-loss amount, (i.e. retention or attachment point), must be at least $25,000. BULLETIN No. LH 2008-01 & PC 2008-04 Page Two 4. The aggregate stop-loss amount, (i.e. retention or attachment point), shall be, at a minimum, 120% of expected paid claims. If all of the above requirements are met, then pursuant to the authority granted to the Commissioner by 36 O.S. §3612(A), the policy will not be required to comply with Oklahoma’s mandated health benefit laws. If a policy fails any one of the above requirements, then the coverage will be considered a group accident and health policy, and will be subject to all group accident and health statutes and rules. All filings shall verify that each of the above requirements that apply has been met. Also verify that the plan or plan sponsor’s bankruptcy or insolvency will not relieve the insurer from the payment of any claim covered by the policy. Stop loss policies sold through surplus lines companies shall be expected to meet all of the requirements of this bulletin. Stop loss policies currently in force must comply with this bulletin at the earlier of the policy’s next renewal date or August 1, 2008. Stop loss policies first issued after August 1, 2008, must comply with the requirements of this Bulletin. QUESTIONS: Questions applicable to this bulletin should be directed to Kathie Stepp, Assistant Commissioner, at kathie.stepp@oid.ok.gov or Susan Dobbins, Assistant General Counsel, at susan.dobbins@oid.ok.gov. or Oklahoma Insurance Department, P. O. Box 53408, Oklahoma City, OK 73152-3408. The Oklahoma Insurance Department encourages readers of this bulletin to periodically check the Department’s web site (www.oid.ok.gov) for news and updates to Bulletins and other relevant material.