Article 4 of 4: Shopping Stop Loss Carriers and Changing Deductibles
Self-funding is rapidly moving into city, county and school district finance departments of all sizes as a major cost-control strategy. And why not? Governmental organizations that self-insure can design their own plans and tailor them to meet their employee’s needs, all while eliminating those features with little utilization. City, county and school district finance personnel know that self-funding your plan can yield significant savings for stable groups from 30 employees and up.
As adoption grows, cost-reduction strategies in self-funded environments are evolving as well. In this article series, Jason Rushton will share 4 top ways that your organization can take advantage of the trend.
Stop loss insurance or reinsurance, is a policy designed to limit losses from claims. These plans protect your organization because they ensure that unexpected large or numerous claims will be covered and not deplete your reserves in a self-funded environment. Many times, your Third Party Administrator (TPA) has a preferred carrier they regularly partner with and they may get a discount. But are you sure your carrier is the right one for your organization?
If it’s been a while, time to get going. When shopping, take into consideration your group’s claims behavior. For example, if you have a member who is on dialysis, try to find a stop loss carrier that has a dialysis program or a preferred network of dialysis providers with a discounted rate.
Also, consider the “specific” or “spec” deductible on your Stop Loss Plan. This is the deductible for the individual members on the plan. The aggregate deductible is generally set based on 20-25% of expected claims. However, it is good practice to review the claims annually and make appropriate adjustments to the spec deductible. For example, if you have good claims experience and can take on the additional risk, you may want to increase your spec ($50k to $75k or $75k-100k, etc.). Increasing your spec would also decrease your premium. Make sure that this deductible review is always included in your broker’s annual review.
This concludes our self-funding article series. Please feel free to comment below or ask questions. If you are new to self-funding and want to learn more, contact your NIS Market Development Representative or visit our resources page.