Stop-loss insurance remains extremely important for self-insured health plans, with a third of plans reporting catastrophic claims in excess of $1 million in the past two years, according to a new survey.

The latest Aegis Stop-Loss Premium Survey, in its 13th year, finds that premium costs for stop-loss coverage varies greatly among companies with self-insured plans. This is due to several reasons, including companies' risk tolerance, employee demographics, variety in contracts, and brokers' commissions.

However, the Aegis survey draws on individual stop-loss deductibles based on company size and underwriting ratios in its calculations—and includes a plotting tool whereby companies can calculate their own premiums in comparison with current trends.

Aegis notes that calculating this adjusted premium can suggest whether companies are paying too much for commissions. "The survey's intent is to show policyholder total premium expense," the report said. "Broker commissions are not removed. They are a frequent component of premium—and may be hidden, if not unknown, to respondents, including the correct manner to deduct. Those with excessive loads may observe it in their comparison to this survey."

A rising number of catastrophic claims

The survey said there is a rising level of catastrophic claims among those with self-insurance. Reasons for the higher costs may include more aggressive hospital billing and specialty pharmacy costs, the report added.

Looking at the last two years, the survey found that 64 percent of respondents reported at least one claim in excess of $500,000 in 2019, up from 58 percent in 2018. Claimants in excess of $1 million were at 31 percent of respondents, and of those, 6 percent were claims above $2 million, the study said.

Strategies to reduce stop-loss premiums

According to the Aegis report, there are several actions companies can take to reduce stop-loss premium costs. The report recommends:

Index the plan's deductible to medical trends; if not annually, at least biannually.
Be aggressive—ask for reductions or review competitive offers.
Carefully manage claims disclosure; avoid coverage gaps due to nondisclosed claimants.
Match a company's risk and stop-loss contract. Seek contracts that mirror the plans health insurance and does not have provision to exclude claimants or charge more for them at renewal time (A practice known as "lasering," according to the report).
Be knowledgeable–identify the best underwriter options, including those beyond your health plan's offerings.
Use an experienced broker or consultant. The report notes that a less-experienced advisor can cost a plan hundreds of thousands in premium costs or uncovered claims.

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Instant Insights /

Stop-loss catastrophic claims are on the rise

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