The Case against State Regulation of Uninsured Employee Welfare Plans

Abstract

The controversial question whether uninsured employee welfare plans should be regulated as insurance was analyzed in an article by Harold van B. Cleveland published in 1960.1 Reexamination of this question seems in order in view of developments which have weakened the industry position favoring such regulation. Employee welfare plans sometimes do provide death benefits, accident and sickness benefits, hospital-medical-surgical and related benefits to employees and dependents on an uninsured basis, commonly called self-insurance. Benefits are paid directly from general funds of the employer, or from a trust or other separately maintained fund, without a commercial insurance carrier. Substantial savings may be realized by eliminating commissions and state premium taxes and recapturing income on reserves otherwise held by the insurance carrier. A fundamental point to be kept in mind is that application of existing insurance laws to uninsured welfare plans would not simply regulate them in the sense of imposing safeguards-it would effectively