3 Reasons Your Stop-loss Is Broken (And How to Fix It)

Reimbursements

Stop-loss reimbursements are critical to self-insured employers to mitigate the cost of catastrophic claims and to smooth out related financial shocks. Since 2012, the incidence of claims exceeding $1MM has more than doubled — increasing about 10% each year (Voya).

Premiums

Stop-loss premiums are likely your health plan's highest fixed cost. Despite this, employers must continue to pay increasingly high stop-loss premiums - up 10% from 2022 (SHRM) to limit their claims liability and overall risk. Plan sponsors and brokers often bid stop-loss annually in an attempt to lower this increase.

Stop-loss Inaccuracy

Stop-loss policies are dense contracts, rife with actuarial language – and they get more complex as underwriters and plan sponsors negotiate over contracted liability. It’s convenient to trust that contracted terms are being administered correctly. In recent years, many employers are carving out their stop-loss to third-party carriers due to their lower premiums.

Due to this complexity, stop-loss administration is often inaccurate. Why?

1.????Stop-loss carriers are at the mercy of the claims data they receive. If they are a standalone carrier, they are dependent on the medical claims administrator (TPA/ASO) and the Pharmacy Benefit Manager to send them all eligible claims. When you have two vendors acting independently, claims aggregation errors often occur.

2.????Stop-loss policies often include “run-out” claims that were incurred by a prior claims administrator. The prior carrier is not incentivized to send claims to stop-loss for a terminated client. It is not unusual for 6-month (or indefinite) data lags for these “run-out” claims.

3.????The seasonal increase in claims at year-end overwhelms claims administrators and stop-loss eligible claims incurred at year-end are often not processed in time to meet the stop-loss reimbursement terms. Watchful plan sponsors can find missed reimbursement opportunities that were incurred and received by the TPA/ASO that were not paid until the next calendar year when the stop-loss deductible has been reset to zero.

How To Manage Stop-loss

The best way to manage stop-loss is by reacting quickly and having current data that is aggregated across all vendors. Strategies include:

• Active front-end bidding and claims forecasting based on historical claims data for your health plan, not industry averages
• Accurate data on implemented clinical programs that contribute to avoided costs. This can enable negotiation with stop-loss carriers before they increase your premium by 10% again
• Manage stop-loss reimbursements as actively as the front-end bid process
• Vendor management of all involved parties

Managing Stop-loss In Action

For a Wellnecity client, we detected a claimant who far surpassed the stop-loss deductible but did not result in the employer receiving any reimbursements. The root cause was high-dollar pharmacy claims pushing the member over the threshold. The stop-loss vendor failed to capture this case and did not have the Medical and Rx claims aggregated properly.

Working with the employer and the stop-loss vendor, Wellnecity provided accurately aggregated claims data that led to over $500K in additional reimbursement (about 33% of their annual stop-loss premium).

Is your stop-loss being managed correctly? Wellnecity can help with a full analysis. Message me at [email protected] for more information.