STOP LOSS 101

What is Self-Funding?  Alternative funding vehicle to a fully-insured plan  Maximizes employer’s cash flow of benefit dollars  Employer controls plan design and funding

Advantages of Self-Funding  Eliminates Most Premium Tax  Reduce Administration Costs  Control of Plan Design  Improve Cash Flow  Earn Interest on Reserves

Purpose of Stop-Loss Coverage  To Limit Employer’s Risk  Facilitate Plan Budgeting  To Protect Group from Individual Catastrophic Losses  To Limit Overall Claims Costs

Two Types of Stop-Loss Coverage  Specific Coverage  Aggregate Coverage

Specific Stop-Loss  Limits the Employer’s Exposure for each Covered Individual

Aggregate Stop-Loss  Limits the Employer’s Total Annual Claims Cost

Determining Specific Deductible for Group  Number of Active Employees  Good starting point is between 125 to 250 x number of employees  Calculation of Group’s claims experience – (more accurate method)  Group’s willingness to accept risk  Deductible levels can be increased at Renewal to offset rate increases

Contract Options

What is needed to get a quote  Requested Specific deductible  Coverage basis  Commission percentage  Proposed (new) schedule of benefits and current schedule  Census, including d.o.b. or age, dependent status, gender, zip code and network  Paid claims experience  Large claim experience  Rate History  Narrative indicating what the employer or broker is trying to do

Aggregate Excess Loss  Stop Loss carrier will reimburse the Plan at the end of each policy period for excess losses up to $1 million above the ceiling, according to the employer’s plan document and excess loss policy  Monthly Aggregate Accommodation  Manual Aggregates for cases up to 150 lives

What affects Specific Rates?  Specific deductible amount  Incorporates census data  Industry (SIC Code) – Occupation  Lifetime and Annual Plan maximum benefit  Contract basis  Network discount  Admin fees

Comparison of Terms – Items to compare in a quote  Rates/costs  Contract Basis  Run-in or run-out limits  Contingencies of Proposal  Exclusions, “lasers”  Guaranteed renewal? Same terms?  Who is assuming the risk? Who has claims control?

Questions