Client Stories | June 9, 2021

Competitive Medical Stop-Loss Insurance Starts with Bids

Organizations that self-insure their medical and prescription drug coverage recognize the need to have stop-loss insurance as protection against large claims. The ACA’s elimination of annual and lifetime dollar limits more than a decade ago and the steady increase in high-cost claims both underscore the importance of that protection.

Assessing the relative value of a particular stop-loss policy’s coverage can be tough. The best way to make that determination is through seeking regular competitive bids with a range of carriers.

Mother With Premature Newborn At The Hospital

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.

Want to know how we can help?

Leave your contact information and one of our professionals will reach out to start a conversation.

We value your privacy. We'll never share your data with anybody.

See related insights

Senior Woman Discusses Swollen Lymph Nodes With Doctor

Retiree Medical Coverage: Are You Getting the Best Value?

By continuing to offer retiree medical benefits, organizations can reap important benefits.
Business Meeting

Medical Stop-Loss Insurance Checklist

Make sure you’re getting the right coverage for your plan.

This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

Don't miss out. Join 16,000 others who already get the latest insights from Segal.