Medical stop loss or more appropriately, excess of loss coverage, is intended to provide self funded employer health plans with financial protection in the event of catastrophic loss. The concept is pretty simple…if a self funded plan has a large claim above its specific deductible, then the excess amount is reimbursed by the stop loss policy. The simplicity ends when insurance carriers attempt to add sizzle to their products or control exposure through the addition of exclusions and limitations.
We believe that many of the policy enhancements including specific advance, monthly accommodation, terminal liability, no laser renewals, rate caps and multi-year rate guarantees add value though they are not without challenges or added cost to the health plan. The specific advance and monthly aggregate accommodation may help an employer manage the organization’s reserves and cash flow. Terminal liability can offer a low cost safety net to smaller employers which are considering a return to fully insured products. Rate caps and rate guarantees are widely available yet do not offer the client any real protection against escalating costs. Standard premium loads for renewal rate caps and multi-year rate guarantees continue to compound year over year and may result in mitigating the anticipated savings. Like the others in the market, Prodigy offers many of these tools yet we encourage brokers, TPAs and employers to consider the financial impact when comparing options.
A stop loss policy is intended to reinsure the Plan Document yet many employers include ambiguous or poorly crafted language. Therefore, it is important for brokers and TPA to compare the group’s stop loss policy with the Plan Document to ensure that gaps in coverage do not exist. The inclusion of “mirroring” the underlying Plan Document is a great start. To fully protect employers, a review of the Human Resource policies may also be in order. As a standard course of business, Prodigy mirrors the employer’s plan document.
The benefits covered under a stop loss policy will vary by group and could include medical, prescription drugs, dental and vision. A specific or individual deductible is selected on a variety of factors include group size, financial capacity, provider network and historical claim experience. The choice to add aggregate coverage as an overall maximum cost tool is a wise move for small to mid-market groups. The vast majority of larger employers recognize no need for aggregate coverage.
Prodigy offers our clients a range of stop loss solutions not commonly found in the reinsurance industry. We encourage brokers and TPAs to contact our sales or underwriting team to discuss alternative strategies using captives, split deductibles, scheduled reimbursements or other flexible options.