New Stop-Loss Approach Could Be Expanded If Successful

By Cyril Tuohy

InsuranceNewsNet

A pair of Sun Life Financial executives said they intend to closely track a new approach linking stop-loss coverage for employers to voluntary critical illness coverage for employees. If the marketplace shows interest, Sun Life could expand the initiative to other areas of critical illness.

Linking stop-loss with critical illness insurance to cancer could be extended to other serious illnesses like kidney dialysis, end-stage renal disease, heart attack and stroke, said Dan Sirois, director of product development for stop-loss at Sun Life.

“We’re looking to see how the market reacts to this and we’ve thought about other products to link,” he said, in an interview with InsuranceNewsNet.

Last week, Sun Life announced a stop-loss cancer rider that provides an enhanced benefit for Sun Life’s self-insured stop-loss customers who qualify for reimbursement for a catastrophic claim due to cancer and also offer their employees a Sun Life voluntary cancer benefit.

The stop-loss cancer rider provides qualifying employers with a deductible reduction of as much as $10,000, Sun Life said.

Linking employer stop-loss with employee critical illness works like this: The stop-loss policy would reimburse the employer for any expenses incurred above a deductible of, say, $100,000.  If the cost of cancer treatment is $500,000, the stop-loss policy reimburses the employer $400,000 for the cancer claim, assuming the claim qualifies.

With a deductible reduction of $10,000, however, Sun Life will reimburse the carrier $410,000, giving the employer an incentive to offer cancer or critical illness coverage.

The employer reimbursements under the stop-loss policy are separate from the lump sum payments made to employees under the cancer or critical illness policies. Those payments range from $5,000 to $50,000, according to Sun Life.

“It's about risk sharing between the self-funded employer and stop-loss carrier,” Sirois said, in an interview with InsuranceNewsNet.

Scott Beliveau, stop-loss vice president for Sun Life, said in a statement that the idea was to help “both employees and employers manage the financial implications of cancer.”

Sirois and Matthew Ceurvels, associate director of product management for Sun Life, said the company launched the strategy after consulting with sales reps and advisors about the potential demand for such a “linked” approach.

“Senior sales reps have gone out and brokers and producers who work with these lines say, ‘Well it seems like a no-brainer: employers have additional protection and more often than not they have voluntary coverage,’” Ceurvels said.

Large employers who self-insure buy stop-loss insurance to protect themselves from having to pay for the entire cost of a catastrophic claim that could easily blow through a company’s deductible, also known as a self-insured retention.

Whether other self-insured companies have shown an interest in this linked strategy is not clear and the Self-Insurance Institution of America, the trade group that represents self-funded employers, did not respond to messages requesting comment.

Were Sun Life to expand the program, it would likely do so around the most costly stop-loss catastrophic claims in its database: chronic renal disease, birth anomalies, diseases connected to blood vessels in the brain, surgical complications, congestive heart failure, respiratory diseases and spine conditions, the Sun Life managers said.

The most costly three conditions, malignant cancer, end state renal failure and leukemia/lymphoma represent 33 percent of all stop-loss claims payments issued by Sun Life over a four-year period from 2008 to 2011, according to the results of a company study published earlier this year.

The total of all stop-loss claims payments during that four-year period was $1.7 billion.

Cancer, however, continues to be the most costly stop-loss illness by a wide margin. The disease comprised 25 percent of all stop-loss claims payments from 2008 to 2011, the company said.

Traditional radiation therapy treatment for cancer runs into the thousands of dollars, and more modern immunotherapy treatments can easily cost more than $100,000. There were 1.63 million new cancer cases and 577,190 deaths in 2012, according to American Cancer Society estimates.

“No employee wants to get cancer and no employer wants employees to get cancer,” Sirois said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].