A Texas court has ruled that stop-loss insurance policies sold to self-funded employee benefits plans constitute reinsurance, such that the Texas Department of Insurance cannot regulate them. The Department has no authority to regulate reinsurance (although it can and does regulate direct insurance). Two insurance companies therefore sought a declaratory judgment that they acted correctly by reporting stop-loss policies sold to self-funded plans as reinsurance instead of direct insurance. The parties stipulated to the facts and filed cross-motions for summary judgment. The trial court granted the Department’s motion for summary judgment, agreeing with the Department that self-funded plans are not insurers under Texas law. This judgment was reversed on appeal. Because self-funded plans do many of the acts that constitute doing the business of insurance, the appellate court held that self-funded plans are insurers. Among other things, the plans make insurance contracts with the employees of the employer sponsors; collect premiums for their service from the plan sponsor or the employees or both; deliver insurance contracts to the employees; and provide expense indemnification, reimbursement, or direct payment of medical expenses to individuals. American National Insurance Co. v. Texas Department of Insurance, Case No. 03-08-00535-CV (Tex. Ct. App. Apr. 22, 2010).
This post written by Brian Perryman.