American Medical Security, Inc. v. Bartlett

Instead of buying health insurance, some Maryland employers funded their own employee health plans. To limit financial risks, the employers purchased stop-loss insurance policies to cover any medical expenses for a given employee above a specified point, which was known as the attachment point. Under this system, the employer paid an employee’s healthcare costs up to the attachment point. If the employee had medical expenses exceeding that amount, the employer made a claim under the stop-loss policy to cover the extra expenses. A self-funded employer health plan was not considered insurance and was not regulated by state insurance laws. Maryland required that health-insurance policies provide 28 specific types of coverage. Maryland’s insurance commissioner, Dwight Bartlett (defendant), was concerned that employers would dodge this regulation by creating what would technically be self-funded health plans but with very low attachment points. In that scenario, most of an employer’s risk would still be insured but not subject to the state’s insurance laws. Thus, employees under those plans might not get many of the 28 types of mandatory health coverage. To try to close this loophole, the commissioner enacted regulations stating that any stop-loss insurance policy with an attachment point of less than $10,000 per employee was actually a health-insurance policy and subject to the mandatory-coverage law. Employers with self-funded health plans (the employers) (plaintiffs) sued, claiming that the attachment-point rule was preempted by the federal Employee Retirement Income Security Act (ERISA). The district court entered summary judgment in favor of the employers. The case ended up before the Fourth Circuit.