High court rejects Md. plea on health plan maneuvering 'Stop-loss insurance' at heart of rebuff

Health care

June 23, 1998|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- Rebuffing Maryland officials, the Supreme Court yesterday refused to consider a plea that states be allowed to prevent companies from using self-insured health plans to evade state mandates on the type of benefit they must provide.

Maryland officials have thus lost their bid to regulate the use of so-called "stop-loss insurance" policies, which are designed to offset unexpected losses in covering health benefits. Such policies have become increasingly popular in recent years -- a trend that state officials contend directly relates to the growing number of benefits the General Assembly is requiring of health insurance policies within its reach.

States normally have no power to regulate self-insured health benefit plans that companies set up under federal benefit law. But states are allowed to regulate insurance policies that benefit plans buy to pay off employees' health claims.

If a company buys insurance that amounts to underwriting their employees' health claims, then Maryland insists that those policies guarantee 28 specific kinds of benefits -- a requirement that would not apply if the policy was beyond a state's reach.

State officials, in their appeal to the Supreme Court, said stop-loss policies were being used increasingly by self-funded plans as "a sham" to get around state insurance regulations, with the result that workers are losing benefits to which they would be entitled.

The 4th U.S. Circuit Court of Appeals ruled last year that Maryland and other states may not regulate stop-loss policies, because they are attempts to regulate employer-employee relationships in health plans, and only federal law can do that. The Supreme Court gave no reason for declining to disturb that ruling.

In a second insurance case before it yesterday, the court agreed to decide at its next term whether the federal anti-racketeering law -- RICO, for short -- can be used in disputes over insurance coverage that also are covered by state law. A federal appeals court in California ruled in November that the RICO law can be used in a lawsuit by workers claiming that a hospital gave kickbacks to a health insurance company, reducing the insurer's share of benefit costs but increasing workers' "co-pay share."

A decision is expected next year.

The court agreed to rule at its next term on a request that it scuttle a $1.5 billion settlement deal in a major asbestos injury and death case against Fibreboard Corp. -- a longtime maker of asbestos-containing products.

A federal appeals court has upheld the settlement package, resulting from a friendly lawsuit between Fibreboard and its insurers, and lawyers for those claiming harm from exposure to asbestos products.

It is a class-action lawsuit and the settlement was intended to wipe out all future lawsuits against Fibreboard for asbestos-related injury or death.

Last year, after the Supreme Court sharply limited federal courts' power to allow class-action settlements, the justices ordered that the Fibreboard deal be re-examined in lower courts. That simply led to a second appeals court ruling, once again upholding the deal.

A final ruling on whether to nullify the deal is expected next year.

Pub Date: 6/23/98

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