It’s fall and if you’re a benefits leader, you are probablygearing up for open enrollment and finalizing any new vendorimplementations. Now is also the time when most self-insured plan sponsors need to obtain orrenew a stop-loss insurance policy, a policy placed ona self-insured medical plan that reimburses the plan sponsor forclaims exceeding specified levels.

While straightforward on the surface, getting the details rightin your stop-loss coverage can save or cost you millions. There are two primaryforms of stop-loss policies:

• Specific Stop Loss reimburses the plan sponsorfor individual claims that exceed a specific level called theAttachment Point or Deductible during the policy period. Forexample, a policy with a $250,000 Attachment Point wouldessentially cap an employer’s cost for each member at $250,000 in ayear.

• Aggregate Stop Loss reimburses the plan sponsorif total claims in the plan exceed a specified level in a year.This level is usually expressed as a percentage of expected plancosts (e.g. 125 percent). As an example, a plan that is expected tohave claims totaling $10M in a year with 125 percent aggregatestop-loss would be reimbursed for claims above $12.5M in the year.These policies typically have a maximum reimbursement level ($1M iscommon).

Here is a quick check-list to review when looking at yourstop-loss renewal.

1. Have you started the process yet? If thestop-loss renewal is left to year-end, you’ll have fewer optionsand a greater chance of ending up with a gap in coverage. Some goodinitial steps are to review your loss experience, review therenewal, and check your policy against the issues listed below.

2. Do you have any eligibility gaps in yourpolicy? These are more common than you would think. Weoften see an underlying medical policy that provides coverage forindividuals excluded from the stop-loss policy. Common misses areCOBRA enrollees, retirees, domestic partners, and inactiveemployees on leave or disability.

3. Do you have any benefit gaps? These wouldinclude anything covered by your medical policy, but not includedin stop-loss. The most significant area to check is pharmacybenefits. Other areas to check include: behavioral health, surgicalcenters of excellence paid through a TPA, and claims approvedoutside of the plan terms (e.g. experimental procedures).

4. Does your stop-loss policy have an annualmaximum? Before the Accountable Care Act (ACA), lifetimemaximums on employee benefit plans were common (often set at $1M or$2M), so stop-loss policies could have an identical maximum withoutrisk to the plan sponsor. Since ACA prohibits lifetimemaximums on benefit payments, employers are taking on significantrisk if their stop-loss policy has a maximum. I’ve seen claimsexceed $5M for an individual in a single year.

   Employer Size	Average Stop-Loss Deductible
   200-999 Employees	$150,000
   1,000 – 4,999 Employees	$290,000
   5,000 + Employees	$480,000

   Source: 2017 Kaiser Family Foundation Survey

5. If you have multiple vendors, is consolidateddata at the member-level being provided to the stop-loss carrier?If not, it’s possible that you aren’t getting all claims countedtowards the deductible and reimbursed. Sometimes an employer willbe paying to have both medical and pharmacy included in stop-loss,but not have the data submitted to actually cover the losses infull.

6. Has it been years since you adjusted your specificdeductible? Stop-loss deductibles need to be adjustedevery few years to prevent a greater and greater proportion ofmedical claims exceeding the deductible and becoming stop-lossclaims. The level should also be reviewed if you have a significantchange in number of employees, mix of insured and self-insuredplans, or tolerance for financial risk. Ultimately, the stop-lossdeductible needs to be based on each organization’s uniquecircumstances, but the national benchmarks below are a goodreference point.

7. Do you have aggregate stop-loss? Should you?While Aggregate Stop-Loss provides important protection for smallerself-insured plans, its value can be questionable for mostemployers above 1,000 employees (and even many smaller plans). Atypical aggregate policy begins paying out at 125% of expectedcosts and the total payout is limited to $1M. Consider a plan with1,000 employees that has expected claims of $10M/year. An aggregatepolicy for this employer wouldn’t provide any payment unless theplan costs exceed $12.5M ($2.5M over budget) and then would onlycover the next $1M.

8. Have you considered an aggregating specificdeductible? While it seems complex on the surface, anaggregating specific deductible is simply a way to reduce premiumlevels without losing protection against significant high claims.Here’s how it works:

   |

   Consider a plan with a $100,000 specific deductible. This plannormally covers the amount of all claims that exceed $100,000 nomatter how many claims or the total value that exceeds $100,000.With aggregating specific, the policy doesn’t pay until a totalnumber of dollars is spent in individual claims over $100,000 - -which is what you are trying to protect against. Incorporating anaggregating specific deductible into your policy can provide a“breakeven” result in years with significant large claims and anopportunity for significant savings in years with fewer largeclaims.

9. Have you recently conducted a competitive bidding forstop-loss coverage? Premiums can frequently vary by 20-50%in a competitive bidding process. For most employers, we recommenda detailed review annually and a competitive bidding process every3 years. In your competitive bidding analysis, don’t forget aboutfees that your other vendors will charge to interface with yourstop-loss carrier.

10. Do you know how much compensation your broker orconsultant receives for placing this policy? Are yougetting value?

Bottom line, there are millions of dollars at stake aroundgetting the appropriate stop-loss protection in place. The reasonyou buy stop-loss is to protect against unlikely but costly events.Make sure your policy doesn’t leave you with unprotected gaps.