Here’s What You Need to Know About Stop-Loss Health Insurance

Written by HUB International | Jul 05, 2023

Employers of every size continue to struggle with the rising costs of healthcare, which ultimately increases the cost of medical premiums for everyone.

While employers have traditionally worried about large medical claims, the growing popularity of exorbitantly-priced specialty drugs is creating an entirely new category of potentially catastrophic healthcare spend.

In fact, after raising the prices of more than 1,400 prescription drugs in 2022, pharmaceutical companies started 2023 off with a 5% increase for more than 450 medications. Add to that considerable pipeline of new medicines to treat specialty diseases, including gene cell therapies, RNA therapies, immuno-oncology treatments, etc., and you have a recipe for disaster.

One solution means looking inward: transitioning from the fully funded model of healthcare benefits to self-funded health plans featuring stop-loss insurance. Stop-loss insurance is essential for a self-funded plan because it enables an employer to cap medical claims expenses at a specific amount.

STOP-LOSS HEALTH INSURANCE STARTS WITH MANAGING COSTS

Whether from providers, hospitals, or for drug regimens, it’s not uncommon for health plans to experience individual claims of $500,000 or more. Starting a self-funded plan means first managing costs at the plan level before seeking stop-loss coverage. The better plan costs are managed, the better position the organization is in for getting stop-loss coverage.

That’s important, as groups with profitability or large claims challenges can see extremely high stop-loss increases.

Self-funded plans with stop-loss health insurance need to actively guard against such claims. Doing so starts with a thorough evaluation of the plan’s performance. A third-party administrator (TPA) can determine the plan’s cost pressure points and help determine how to lower costs.

For instance, one way to manage costs is by carving out pharmacy benefits from the underlying plan and managing the benefit through a pharmacy benefits manager (PBM). In doing so, expensive specialty drugs can be carved out from the pharma program and managed more effectively through patient assistance programs.

Similarly, network solutions like reference-based pricing can also be used for programs like dialysis management.

WHERE STOP-LOSS HEALTH INSURANCE COMES IN

Effective claims management helps keep stop-loss premiums manageable. That is particularly important because stop-loss health insurance premiums can be volatile, mirroring the volatility in healthcare costs.

When considering stop-loss insurance, you should be mindful of two important components:

Plan mirroring: This ensures a stop-loss contract integrates with the underlying plan documents, language and coverage specifications, avoiding gaps between the medical plan and the stop-loss contract.

No new laser with rate caps: A laser assigns a higher specific deductible to plan members with a higher predisposition for illness or healthcare costs, rather than raising the deductible for all. A no new laser contract protects against new lasers being placed on the contract at renewal. When coupled with a rate cap, this will limit the premium increase.

Employers moving toward self-insurance for healthcare should ensure their broker can manage the complexities of stop-loss insurance. Not only can brokers iron out the particulars of stop-loss health insurance, but they can also leverage relationships with carriers that have necessary financial protection against extraordinary losses.

WANT TO LEARN MORE?

HUB International’s employee benefits advisors can help you navigate the complexities of self-insurance and stop-loss healthcare insurance. Give us a call to learn more.

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