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Business owners consistently list rising health care costs as one of their top concerns. In fact, for most businesses, the cost of group health insurance easily stands as one of its top three corporate expenses; and it is increasing at a rate which is more than four times the general rate of inflation. It is not surprising, then, to see the high level of interest being exhibited by corporate executives in any program which holds out the possibility of maintaining, or even lowering, these costs.
One popular method is switching from a traditional fully-insured group health insurance program to a self-insured plan with stop-loss insurance (commonly called “self-funding”). This program offers many advantages to the employer, which more than offset the increased assumption of risk. For all but the largest of employers, stop-loss insurance is a key component of a self-funded program. It allows them to indemnify themselves against unpredictable and/or catastrophic loss potentials, and only self-insure the smaller, more predictable claims exposures. This is accomplished through the purchase of individual and aggregate forms of stop-loss insurance coverage.
Of the two, individual (or “specific”) stop-loss insurance is the more important. Typically, it guarantees 100% of the claims paid on any one individual which are in excess of the risk retention level selected will be reimbursed by the stop-loss insurance carrier, up to its policy limits. However, as market conditions have changed in recent years, so has the way this coverage is written.
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Stop-loss insurance is most commonly provided in the form of annually-renewable contracts. This allows the carrier to re-evaluate the risk, and change its policy terms and pricing each year. Unfortunately, this has also led to a practice known as “lasering,” which has threatened the viability of self-funding for small to mid-sized groups. Lasering is a process whereby the carrier applies a higher deductible amount to select, high-cost individuals, thereby forcing the employer to assume this additional risk in an effort to keep the premium rates as low as possible. While a laser option may actually work to the benefit of a group in certain circumstances (such as when the group feels the potential risk is far less than what the carrier is estimating), it can also have a devastating effect on Plan costs. Obviously, the smaller the group the greater the threat lasering presents.
To offset this risk, Donley & Company, Inc. has put together an exclusive program intended to provide stop-loss insurance protection on a “pooled” basis, as opposed to a “case-rate” basis. This means that in exchange for an additional charge, the stop-loss insurance coverage will contain the following features:
- Guaranteed renewability
- No lasering at renewal
- A premium increase capped at 45% of the in-force rates
This is a truly remarkable development in the realm of stop-loss insurance, and opens up tremendous opportunities for self-funding of small-to-medium-sized groups (from 25 to 500 employees). We are very excited to offer this superior level of protection, and feel that it affords a unique opportunity to attain a higher level of quality and value in self-funding. Contact us to learn more. |
