‘Dangerous Path:’ Small Business Healthcare Plans Threatened

Multiple bills regulating stop-loss policies used in conjunction with employer-sponsored, self-funded health plans faced legislative hurdles before being voted out of committee. 

SB 10 and SB 11 both place mandates on self-funded health plans and significantly increase the amount of medical risk faced by small businesses. 

SB 7 establishes a study on the feasibility of regulating stop-loss policies coupled with self-funded plans as fully-insured plans. 

In a March 24 Public Health Committee hearing, CBIA’s Grace Brangwynne testified with Rep. Kerry Wood (D-Rocky Hill), chair of the Insurance and Real Estate Committee, to explain SB 7’s damaging impact. 

“Equating self-funded plans and fully-insured plans may create a legal grey area, as the regulatory standards for self-funded and fully-insured plans are completely different,” Brangwynne said. 

“By treating stop-loss policies coupled with self-funded health plans as one entity, the proposal could potentially violate ERISA.”

Health Plan Regulation

ERISA, the Employee Retirement Income Security Act of 1974, is a federal law that sets standards for most voluntarily established retirement and health plans.

Employers typically provide benefits to their employees in two ways:

• A self-funded health plan where they directly pay the cost of medical claims incurred
• A fully-insured plan where they pay a monthly premium to an insurance company who assumes the medical risk 

Many employers choose to purchase a stop-loss policy in addition to self-funding to protect themselves from high costs incurred by catastrophic claims. 

As Grace Brangwynne notes in @ctnewsjunkie, a bill that proposes studying regulating stop-loss policies used in conjunction with self-funded #healthcare plans “could pose major legal issues due to ERISA’s pre-emption clause.”https://t.co/c86XIOVgJm

— CBIA (@CBIANews) March 25, 2025

Self-funded plans are regulated at the federal level by ERISA. 

Stop-loss policies and fully-insured plans are regulated at the state level by the Connecticut Insurance Department. 

ERISA’s preemption clause and relevant case law outline the circumstances under which state laws attempting to regulate self-funded plans will not apply. 

In her testimony on the bills, Brangwynne recommended that legislators consult with legal counsel to ensure such language is ERISA-compliant. 

‘Dangerous Path’

Lawmakers removed the sections of SB 10 and SB 7 containing onerous language regulating stop-loss and placing mandates on self-funded plans.

These bills advanced to the Senate floor for a vote with these modifications. 

A new @NFIB report the rapidly increasing cost of #healthinsurance is crippling #smallbusinesses. “Small businesses are being forced to make difficult choices among ever-waning options,” says @nfib_ct's Andy Markowski. https://t.co/XKE9dK9SRq

— CBIA (@CBIANews) March 26, 2025

“I think it’s a very dangerous path to go down to start discussing regulations around a tool that helps businesses maintain more affordable healthcare,” said Wood.

However, SB 11 still contains language that increases medical risk for small businesses by hundreds of thousands of dollars. 

It is awaiting a vote in the Senate. 

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For more information, contact CBIA’s Grace Brangwynne (860.244.1163).