As September approaches, activity in the catastrophic stop-loss insurance market will start to heat up for self-insured plan sponsors. This is when the annual dance of plans obtaining their proposed premium for the coming year, and trying to find ways to mitigate the increase, hits a fever pitch.
Imagine a province, without a single provincial insurer, where you can only buy automobile insurance from one company with no competition, and with no reward for lowering your own risk by doing all the right things (i.e., no accidents, no tickets, etc.). The public uproar would be significant.
Yet, that’s where we are with catastrophic stop-loss for administrative-services only plan sponsors. There isn’t visibility around where quotes come from and the reasons for increases, and there’s no reward for plan sponsors that have excelled with their plan design and managing risk in their existing experience.
But if stop-loss insurance plans were a losing proposition, they wouldn’t be offered. If done properly, they’re a win-win for the plan sponsor and the insurer.
Here are some ways plan sponsors are changing the annual dance:
- They’re leveraging their claims experience to complete predictive modelling on their high-cost risk moving forward based on member demographics, disease-state profile and severity index, geography and plan design. Once a plan knows its risk, it’s like playing poker when you know everyone else’s cards.
- They’re insulating themselves with proper plan design centred around clinical management of prior authorization, by optimizing claims experience at the point of prescribing. Prior authorization has become an offering driven by the efficient review of claims by non-clinical experts in the vast majority of cases. In the second quarter of 2018, 47 per cent of new prior authorization claims had an issue to address — either the claim was for someone who didn’t clinically qualify for therapy or a submitted claim wasn’t for the most appropriate, evidence-based drug and/or dose for that member.
- They’re seeking competitive quotes from specialty stop-loss underwriters that assess a plan experience and design on its own merit to open a more fulsome dialogue on risk.
Some of the results of taking this approach have been remarkable. One recent example involved an ASO plan that was able to access a stop-loss premium (at the same attachment point and based on the current experience) at a cost that was 54 per cent less than what they were initially quoted. It didn’t have to go to market. It didn’t have to change its health and dental insurer. It simply focused on its own experience, proper risk management and understanding all the options available in the market.
When a plan sponsor can avoid throwing away tens or hundreds of thousands of dollars annually in high stop-loss premiums, it’s worth considering a new annual dance, isn’t it?