NU Online News Service, March 9, 10:50 a.m. EST

WASHINGTON—The National Association of Insurance Commissioners decision to study whether stop loss model laws should be modified to account for inflation is a potential “critical issue” for the risk retention industry, an industry lawyer says.

Kevin Doherty, the Self-Insured Institute of America’s NAIC counsel, made that assessment on Thursday at the SIIA’s 26th annual legislative and regulatory conference, held in Washington, D.C. this week.

Doherty is a partner in the law firm Burr & Forman, LLC, Nashville, Tenn.

The issue Doherty referred to was taken up at the NAIC’s Spring National Meeting, held in New Orleans last week.

His comment was based on a decision of an NAIC’s task force last week to evaluate this year the Stop Loss Model Act to determine whether it should be indexed to account for medical inflation.

He says the Task Force has hired Milliman, Inc. to conduct an actuarial analysis of the issue and report back to the task force.

He cautions that limiting the ability of self-retention groups to purchase stop loss insurance would have a severe “impact” on the industry, especially small businesses.

An SIIA official notes that the issue was last reviewed in 1985.

Doherty says it is unclear when a report will be issued or a recommendation made, but he cautioned that the industry “might have a political battle ahead” if the NAIC decided to pursue the issue. At the same time, he says, “I don’t have a significant concern that the current model law will be changed.”

On other issues, Doherty says the industry appears to have accepted an NAIC demand that captive risk retention groups file an annual risk-based capital report as of Jan. 1, 2014 in all states where they are active. Doherty notes that, “This was already the case in many states.”

He also says that during the NAIC’s meeting the commissioners assigned a task force to study insurers’ use of captives and special purpose vehicles to transfer third party insurance risk in relation to existing state laws and regulations.

Doherty says the task force will also establish appropriate regulatory requirements to address concerns identified within the study.

He says to those attending the meeting that, “The appropriate regulatory requirements may involve modifications to existing NAIC model laws and/or generation of a new NAIC model law.”