The cost of insurance is ultimately the amount of money taken out of the system by way of fees, taxes, overhead, and profits. The very first thing we talk about is not price, but expense levels, volume discounts, and minimum loss ratios. In the long run, low expense levels and minimum loss ratios will compete very favorably with insurance company profit margins and lead to lower stop loss insurance costs.
Claims, the largest cost for a self funded employer, can be addressed through Advanced Health Engagement that includes health assessment questionnaires, automatic price negotiations on prescriptions, predictive modeling, and employee engagement.
Stable renewals result from a good risk management strategy and appropriate stop loss protection. We explain our goal to our carrier for stable renewals and how we expect to achieve them and invite them to work with us to achieve this goal. The employer’s goal is to have renewals as close to underlying trend as possible. Actual trend is quite different than what carriers tell us. The employer then has an opportunity to be below trend with smart management of the health mix of their group.
Our management strategy is separated in specific risk layers. We make it clear we want the reinsurance layers to be true reinsurance, with no repercussions to the employer in the event of a catastrophic claim.
The First Layer
The self-funded layer below the specific stop loss deductible is the most predictable and the spread of risk is across the employee base of each employer. That is, the employers pay their own self-funded risk.
The Working Layer
(specific stop loss layer)
The insurer should pool mid-size shock claims within the purchasing group. The risk is spread across all the employers in the initiative. This pooling takes place as part of the calculation of ongoing stop loss rates.
The Catastrophic Layer
Very large shock claims should be fully insured with a stop loss carrier. That is, designate a portion of the stop loss premium to cover catastrophic claims.
After issue of the policy, we want the employer to be treated with respect even if a large claim arises or poor experience emerges. After all, this is the contingency for which our clients buy insurance!