Tag Archives: self-insured

Marketplace developments for stop-loss insurance coverage

Stop-loss coverage is purchased by self-insured employers looking for coverage from catastrophic medical and pharmacy claims. Based on the most recent data available from S&P Global Intelligence, the stop-loss market stands at approximately $24 billion in premium.

In March, Milliman sent survey participation requests to a wide range of employer stop-loss market participants. Of those receiving a request, 25 provided survey responses. This survey is an update to Milliman’s prior employee stop-loss market survey, which was published in May 2019.

In this paper, Milliman’s Rob Bachler, Nick Johnson, Brian Reed, and Mike Hamachek summarize the findings from the most recent stop-loss survey.

Employer stop-loss market considerations for health plans

Over the past decade, submitted financial filings suggest the employer stop-loss (ESL) market has nearly tripled, growing from roughly $7 billion in premium in 2008 to over $21 billion in 2018. As this growth has occurred, a significant share of it has accrued to health plans rather than traditional ESL carriers. While there can be hurdles for a health plan to overcome when trying to enter the ESL market or expand an existing stop-loss block, the market can provide meaningful opportunities.

Since 2006, when health plans represented just over one-third of the ESL marketplace, health plans have grown to represent nearly 60% of the market. A majority of this growth in that time period has been concentrated in large, national health plans, whose market share has more than doubled, from 16% to 33%.

The ESL market is different from the fully insured market that comprises the majority of most health plans’ premiums. As such, it is important that health plans wishing to enter (or grow in) the market understand the ramifications of the decision.

In this paper, Milliman’s Rob Bachler and RGA’s David Sipprell enumerate the considerations health plans should examine before diving into the ESL market.

Understanding trend guarantees when performing TPA selection analyses

There has been increased interest from both employers and third-party administrators (TPAs) about incorporating medical trend guarantees into TPA selection analyses. In general, a trend guarantee is defined as an agreement between a TPA and an employer that compensates the employer in the event that the year-over-year trend in medical claims costs exceeds the negotiated amount.

While trend guarantees may offer a useful hedge against unexpected increases in costs, employers should be diligent in understanding the fine print. A trend guarantee with a lot of caveats and a tiered payout schedule may not have a material impact on the value proposition offered by the TPA submitting guarantees.

Milliman’s Scott Cohen, Paul Sakhrani, and Brian Sweatman offer more perspective in this article.

Milliman survey explores stop-loss insurance market

Stop-loss coverage is purchased by self-insured employers looking for coverage from catastrophic medical and pharmacy claims. Based on the most recent data available from S&P Global Intelligence, the stop-loss market stands at approximately $20 billion in premium.

In March 2019, Milliman sent survey participation requests to approximately 30 employer stop-loss carriers, and 25 provided responses. The survey asked questions about various topics, including:

  • Portfolio characteristics, such as employer size and types of coverage purchased
  • Underwriting measures, such as persistency and discretionary limits
  • Pricing measures, such as a carrier’s average discretionary discount and target loss ratios
  • Historical results, both loss ratio and growth
  • Product terms offered

In this paper, Milliman’s Rob Bachler, Nick Johnson, and Mike Hamachek provide results of the survey.

How can self-funding give employers more control health benefits?

More and more employers are discontinuing their fully insured health coverage and switching to self-funded models so they can gain control over the increasing cost of employee health insurance. This is an unbundled approach that separately hires all of the required functions—medical provider networks, carrier or third-party administrator, pharmacy benefit manager, stop-loss insurer, and consultants—subject to competitive bidding. With this approach, there can be significant cost reductions, usually in the range of 5% to 10%.

Employers are also concerned about quality and administrative efficiency. In many cases, quality remains unchanged because self-funded programs are able to retain the exact same medical networks and coverages previously offered. The transition happens behind the scenes, and employees are often not even aware of it. All the moving parts can be coordinated through a broker or an outside consultant, who handles the administrative burden, and in many cases, can provide data and reports that give employers added insight into employees’ healthcare “experience.”

In this article, Milliman’s Jennifer Janvrin examines the key benefits that employers can derive from transitioning to a self-funded program and provides an overview of the actuarial parts of the program.