The devil is in the details – stop-loss contracts!
TRUE STORIES – Claims over Individual Specific Limit presented more than 6 months after treatment ended: A) Sepsis treated in hospital environment > $1mm. B) Injury to chest at home >$250k.
Scenario 1 – Employer renewal utilized a 12/15 or 12/18. Claim presented outside contract terms, no reimbursement to employer for claim. 12/15 and 12/18 contracts annually both over and under insure an employer.
Scenario 2 – Employer renews utilizing a 12/24. Claim is not paid in the current term, paid if the previous contract is also a 12/24. Better coverage with less gaps than a 12/15 or 12/18. Delays premium return if employer is part of a medical stop-loss group captive.
The truth – Claims are both paid under the 24/12 contract purchased from their carrier. At Renewal employers move to a 36/12, extending the reporting period to present claims for reimbursement. In both example A and B above, the employer received a distribution of premium from 2018 underwriting year in August, 2019. Terminal Liability remains available in renewal contracts.
Employers enrolling in medical group stop-loss captive programs understand the program goals and outcomes as reflected in the materials explaining the value proposition from the captive program sponsor. The programs are all based on the law of large numbers. The program intentions may include some or all the following:
lowering medical spend
-lowering medical trend
-preserving employer’s investment or collateral (program sponsor’s choice of words)
The stop-loss contract is the first document that determines how and when claims are reimbursed, based on the employer’s Signed Plan Document. Direct write carriers reimburse claims quickly, once the claim is accepted. Usually less than 7-12 business days. This is true whether the carrier purchases reinsurance or not (carriers typically buy reinsurance at $2,000,000 over the employer’s Individual Specific Limit).
Managing General Underwriters (MGU) claims authority is tied to the MGU’s excess of loss reinsurer. This extends the claims reimbursement timing to the employer. A second set of eyes reviews every claim reimbursed above employer’s individual specific limit.
Until the passage of the Affordable Care Act (ACA), which coincided with the market expansion of group captives utilizing stop-loss, specific claims largely fell below $1,000,000. The ACA increased claims limits, empowering specialty pharmacy and hospital to increase their charges due to the removal of annual caps.
Does your stop-loss contract meet the needs of today’s ever evolving claims environment? An employer purchasing stop-loss expects reimbursement of claims based on the Signed Plan Document.
Don McCully runs Medical Captive Underwriters LLC, (www.medicalcaptive.com). A program management company focused on alternative risk transfer solutions to lower employer’s costs in both accident and health & property and casualty insurance. ClearCaptive is a 50 state open access, group stop-loss captive solution for middle market employers above 50 employees