Competitive Medical Stop-Loss Insurance Starts with Bids

What bidding can achieve: a client story

The issue

A large organization with 2,500 health plan participants had a medical stop-loss policy with a leading insurance carrier that was up for renewal. The policy had a $200,000 deductible and a “no laser” clause, meaning the policy covered all individuals at that level. (Lasering is an underwriting practice used for self-insured plans that either excludes high-risk individuals who have costly conditions or sets a higher deductible for them.) The policy also had no individual annual maximum and an unlimited individual lifetime maximum.

The organization sought to not only to maintain those terms but also to enhance the coverage — while paying a lower premium.

We recommended a strategy for achieving those important goals.

Our approach

We proposed a competitive bid. Twelve insurers participated.

Through the competitive bidding process, we identified a new carrier that met all of the client’s current terms. Equally important, the premium was lower.

Additionally, the new carrier offered several considerable advantages over the current carrier, including:

• A “no new laser” (NNL) provision — As the term suggests, under the NNL provision, the carrier agreed not to laser any individuals when the policy is up for renewal.
• A “rate cap” provision — The carrier agreed that it would increase the stop-loss premium by no more than 35 percent at renewal — an exceptionally low rate given that 50 percent increases are common. This rate cap limits the client’s future premium liabilities in the event actual claim experience substantially exceeds expected levels.
• Eligibility for a dividend — The carrier agreed to provide a premium refund if the organization’s experience during the first stop-loss policy year was favorable.

The result

Our client obtained the enhanced coverage it sought at a much better price. In fact, its annual stop-loss premium was nearly 38 percent lower.

The client renewed the policy and received the dividend, but we always look to negotiate the best offer at renewal without regard to any possible dividend.