By Cyril Tuohy
Corporate finance departments are more likely to be involved with decisions surrounding stop-loss insurance coverage due to the rise in the number of catastrophic claims, according to a new survey of 244 self-funded employers.
The survey by Aegis Risk found that 19 percent of corporate risk management departments were involved in stop-loss insurance coverage decisions last year, up from 12 percent in 2012.
Aegis Risk’s 2014 Medical Stop Loss Premium Survey also found that 69 percent of corporate finance departments or the office of the chief financial officer were involved in stop-loss insurance coverage last year, an increase of six percentage points over 2012.
Ryan Siemers, a principal at Aegis Risk and the survey’s lead analyst, said corporate risk management departments and CFOs are more involved in stop-loss programs because of the higher numbers of catastrophic claimants.
The removal of dollar limits under the Affordable Care Act (ACA), specialty drug therapies and more aggressive medical provider billings are also likely playing a role, Siemers said in a news release.
“Formerly a rare event, claimants in excess of $1 million are more and more common,” Siemers said.
Self-funded employers buy stop-loss insurance to protect themselves when a claim surpasses the underlying health plan’s deductible. A stop-loss policy, which is designed to cover the occasional “pop-up” claim, reimburses a company, not the employee.
Stop-loss arrangements are typically structured with the help of insurance brokers and consultants. Employers self-fund their claims because it is cheaper than paying for similar coverage in the traditional fully-insured market.
Many of the nation’s largest employers have self-funded medical stop-loss insurance arrangements and put money into a trust fund to pay for claims. Once those claims surpass the deductible, the stop-loss coverage policy takes effect.
The survey, which covered nearly 480,000 employees, also found that 99 percent of respondents have an unlimited lifetime maximum reimbursement provision. Only 13 percent of plans had such a provision in 2010 before the ACA, Aegis Risk said.
As medical stop-loss plans come up for renewal in the fall, Siemers advises companies to share health plan data such as preferred provider organization discounts or case management notes on high claimants.
“Many plan sponsors or advisors don’t leverage this data, which often eases underwriter concern,” said Siemers, who is based in Alexandria, Va. “You have to sell the risk. It translates into a direct reduction of quoted rates.”
A single claimant gap can cost a plan sponsor hundreds of thousands of dollars so companies need to hire experienced advisors or brokers, Siemers said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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