Lifesaver on dock Here's howstop-loss changes are impacting self-insured employers, and whatthey should do to smooth the waters. (Photo: Shutterstock)

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Moving toward self-insurance gives employers greater control,and many companies are taking the plunge to handle their benefitsoffering themselves. But catastrophic claims from an unexpectedinjury or a chronic condition are also on the rise andstop-loss insurance carriers are taking notice.

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These types of claims can rack up hundreds of thousands ofdollars in bills, a potentially debilitating number foremployers.

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Related: Cancer tops list of high-cost insurance claims forself-insured employers

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At the same time, the rising price of health care andprescription drugs has led stop-loss carriers to become a bit morediscerning when renewal season rolls around.

What's changed

Stop-loss insurance is a pooled product whose premiums can becalculated based on the carrier's book of business, group'sexperience or a combination of both, depending on size. Stop-lossinsurance provides coverage on both an individual and a groupbasis. Individual coverage protects from catastrophic or highclaimants, while group coverage is aggregated to prevent spendingover a specified limit.

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As large claims become more prevalent, thanks in part to risingdrug and health care costs, stop-loss carriers have tightened thereins on coverage. That has led to an increase in individualemployee "lasers," or the assigning of a higher specific deductiblefor a high risk claimant, and employers often now have to assumemore liability.

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These changes make it extremely important for you and yourbroker to keep a close eye on how your plan is performingthroughout the year so there aren't any surprises at renewal.

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Here's how stop-loss changes are impacting self-insuredemployers, and what they should do to smooth the waters.

Review your records: More data necessary

Stop-loss carriers are looking more closely at each case andrequesting more information than ever before.

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They have always preferred at least three years of large claimhistory and demographic data, but now request more in-depth data onindividual claimants. This can be tough to get from the carrier, orcould result in more lasers if there are ongoing, largeclaimants.

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If you aren't prepared to supply this information, digging it upcan add weeks onto the process.

Prepare early for lengthy review periods

With this added information in the mix, potential carriers aretaking longer to review data and respond to RFPs. In fact,employers that don't take these delays into account may be cuttingthe renewal too close to their open enrollment deadlines.

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At Corporate Synergies, we ask the market to provide stop-lossproposals 90 to 120 days prior to the renewal date, and werecommend that other consultants take the same approach. Stop-losscarriers are moving at their own pace, and employers need to buildin plenty of added time.

Thinking about self-insurance? Plan ahead

Changing how your health and welfare plan is funded is never aneasy decision, but if you are considering moving away from a fullyinsured model, start planning early.

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It's best to test the waters and "coach" the market about sixmonths in advance of your preferred start date. The idea is to warnthe medical and pharmacy carriers that an RFP is coming, and begingetting them acquainted with your workforce data.

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This process of "getting acquainted" is a little more difficultbecause of the gap in reporting while fully insured. With this inmind, preparation is key.

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At your pre-renewal meeting, be sure to discuss your goals andexpectations with your consultant and team.

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Even with these considerations, more employers are moving toself-insurance than ever before. With 2020 planning drawing to aclose, it's never too early to start taking a close look at yourprogram to see where savings and improvements can be found nextyear.

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Luciano Franco is vice president ofunderwriting and Earl Rutter is underwritingdirector for Corporate Synergies.


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