Self-insured entities encounter various considerations when it comes to stop-loss insurance. This type of insurance is designed to shield employers from catastrophic claims but involves a range of complexities. In this post, we’ll explore the key challenges self-insurers experience and highlight opportunities for effectively managing these difficulties to maximize the benefits of stop-loss coverage.
Before considering how to maximize liability coverage, we should take a step back and understand some of the challenges often associated with this insurance. Then, we can discuss addressing these issues to get more value from this coverage.
One significant dilemma associated with stop-loss coverage is the variability and unpredictability of large claims. Self-insured entities must accurately predict their potential exposure to high-cost claims to set appropriate attachment points. For too many employers, this is a tedious and manual administrative task executed in Excel or a similar in-house tracking system prone to error. Unfortunately, misjudging this number can lead to insufficient coverage, causing employers to pay more out-of-pocket or face high premiums in the following year. The volatility in healthcare costs and the emergence of high-cost specialty drugs or treatments exacerbate this predicament, making it even more difficult to balance cost and risk effectively.
Another hurdle is the renewal process and the potential for increased premiums. Stop-loss insurers typically review self-insured entities' claims history and health trends annually. If an employer has experienced high claims or trends indicate higher future risks, this will likely mean an increase in premiums or an adjustment of the terms of coverage. This unpredictability can make financial planning difficult for self-insured entities. It can sometimes lead to a search for alternative stop-loss providers, which itself is a time-consuming and complex process.
Furthermore, the administrative burden of managing stop-loss insurance is substantial. Self-insured entities must maintain detailed records and documentation to submit claims to their stop-loss insurer. This process requires meticulous attention to detail and compliance with the insurer’s requirements. Discrepancies or delays in claims submission can result in denied claims, putting additional financial strain on an employer. Additionally, employers must stay abreast of regulatory changes that can impact coverage, adding yet another layer of complexity to their administrative responsibilities.
The complex stop-loss process can be challenging for self-funded employers, but there are opportunities to turn things around and enhance the outlook for self-insurers.
Consider the example of one of HCIQ’s current clients who is a healthcare plan manager. They provide shared savings and jointly administered benefit plan options for a group of public employers. Their service covers some 16,000 employee lives across 15 school districts in five self-funded risk-sharing pools.
After a year with a few very high-cost claims, they faced an astounding $5M in stop-loss coverage cost increases. They sensed there was a way to negotiate for a lower number but needed analytics and reporting to support their position.
When this company connected with HCIQ, their administrative team was preparing loss-ratio reports manually by consolidating paid claims data from various medical and pharmacy claim administrators. This process required hundreds of hours and multiple human resources to prepare each quarter. Additionally, this process didn’t arm them with predictive analytics that could be used to counter the high cover cost increases they were facing.
With HCIQ’s help, this company was able to analyze a “Risk Sphere Measurement” for each plan member, along with a forecast of the total cost for each member for the upcoming plan year. Armed with these insights, they went to work addressing their skyrocketing liability costs. They constructed a compelling case and presented it to their stop-loss provider. As a result, they were able to reduce their costs by 6%. This translated to a notable $650K in immediate plan savings.
Stop-loss insurance provides essential financial protection for self-insured entities. Nonetheless, managing it effectively requires careful planning, continuous monitoring, and robust administrative processes.
If you’re a self-insured entity that incurred one or more high-cost claims in the past year, you’re likely facing the reality of those members being lasered out or overall coverage price hikes in the year to come. You may not be able to secure coverage for that plan member at all, and as a result, you’re navigating difficult financial decisions.
However, armed with good, actionable data, such as predictive models that show how a member’s risk is expected to decrease in the coming year, your team can more confidently enter into stop-loss negotiations. Or, your team can rest assured that by accepting a member’s laser, your company won’t be in jeopardy of financial ruin. Access to this kind of intelligence can be acquired with a few clicks of the keyboard. A long, intensive process of data mining and analysis is not required.
With HCIQ, you’ll have access to the same trigger diagnosis that stop-loss carriers use, but with an added layer of predictive modeling, projected costs, retrospective and prospective risk scores, and comprehensive member risk profiles. With this easy-to-use dashboard, you can adjust individual and aggregate stop-loss deductible thresholds on the fly, with updates in real time. If this sounds like a tool that would be useful to your team, then connect with a member of our team today. Contact HCIQ.