Increasingly, self-funded organizations are turning to stop-loss coverage for protection against high-cost claims. In fact, 96 percent of such groups already have it, and for good reason: the number of employees who reported annual claims of more than $3 million recently doubled. The risk is real. With that, if you still don’t have this kind of insurance, here is how stop-loss coverage can protect your organization and your bottom line.
What Exactly is Stop-Loss Coverage?
This is a type of insurance policy that’s increasingly relied upon by self-funded companies to protect them, through reimbursement, against catastrophic medical costs, including large medical and pharmacy claims.
Are There Different Kinds of Coverage?
Yes, there are two types, with many variations for each. With that in mind, the types include specific stop-loss, which pertains to large claims by a single individual. The carrier reimburses the company when the employee’s claims exceed the amount of their deductible.
The second type is aggregate stop-loss, which limits how much an organization might have to pay in expenses on the entire plan, aggregately, amid a given contract term. Here, the carrier reimburses the employer after the end of the contract period for aggregate claims.
How Does This Coverage Work?
For specific stop-loss, say an employer sets its per-employee liability maximum at $150,000 for a policy year, and an employee has total claims of $160,000. In that case, under the stop-loss policy, the organization will be reimbursed for the $10,000 difference.
Aggregate stop-loss coverage is a bit more complex. Overall, with this type of coverage, the point at which the carrier is liable is derived from organizational plan enrollment and the aggregate attachment factor. For example, the employer and carrier may set the average expected monthly claims at $300 for every employee.
Using a rather complicated formula, that factor is set at $450 and is then multiplied by the number of employees enrolled. If that number is 1,000, say, that brings the aggregate deductible for the month to $450,000.
If total enrollment remains the same for the year, the annual aggregate will come to $5,400,000 – the company’s maximum out-of-pocket claims. But if claims come to $5,500,000, for example, the carrier will be on the hook for $100,000.
What’s Expert Care Guidance?
Self-funded organizations should consider getting expert care guidance to make the most of stop-loss insurance coverage.
Mercer, for one, can provide comprehensive coverage terms in addition to a holistic review that evaluates your current plan and works to identify and remediate coverage gaps. In addition, to complement coverage, Mercer does operational and clinical performance assessments of vendors and manages costly claim irregularities.
What’s more, Mercer’s Health Advantage, which is a care management service, offers care management for individuals who have serious, chronic, or acute conditions. Mercer says its strategy improves the quality of care while saving employers $430 annually, on average, per employee.
So, as you can see, stop-loss coverage protects you by capping risk and keeping you safe from very large claims, enabling you to improve organizational performance by eschewing pricier, conventional insurance policies. As we say, Mercer offers a comprehensive approach that can help you establish the right care and claims management strategy for your organization.
Remember, as very expensive healthcare claims are on the rise, stop-loss coverage is crucial if you, as a self-funded organization, want to protect yourself from such claims in any given year.
The stakes are very high here – if you don’t have this insurance, you are indeed vulnerable. So, it would behoove you to put such coverage in place, and soon.