Understanding Your Medical Stop Loss Risks is Crucial to Successfully Preparing for Your Next Stop Loss Renewal

As we start a new year, we also begin to focus on self-funded medical stop loss benefit programs that are up for renewals in plan years 2021 and 2022. From prior experience, we thought that we had ample time for the renewal or marketing, however, we learned that deadlines approached faster than anticipated. Stop loss carriers typically request required employer data 2-3 months ahead of the effective date, but we also have carriers that request data 6-8 months prior to the renewal date. Many employers also request their renewals earlier for benefit or financial planning purposes.

One of the keys to effectively renew stop loss contracts is to understand your group’s medical and pharmacy stop loss risks. It is important to review your own data prior to sending them to the carriers as knowing your risks allows you to negotiate the best contract terms and rates with carriers, or to simply avoid surprises.

Besides your standard procedure for evaluating large claim utilization and stop loss reimbursements, pay particular attention to the following three areas that can significantly affect your stop loss benefits and rates as you renew, or market stop loss programs.

Impact of COVID-19 On Stop Loss Experience. As you look at your group’s experience, pay particular attention to medical conditions with claims exceeding $100,000 that may be closely related to COVID-19, such as large claims for pneumonia, acute bronchitis, severe asthma, and other respiratory conditions. Given that COVID-19 related diagnosis is new in 2020, healthcare provider coding may not be highly accurate, even today. We have seen a rise in frequency of pneumonia and respiratory related stop loss claims in utilization reports - ranging from $200,000 to $800,000 in medical expenses - that are not identified as COVID-19 related procedure and diagnosis codes. Make sure you negotiate with your stop loss carrier as to not classify these large claims as “likely to recur in the future” if, for any reason, you suspect them as COVID-19 related charges - as vaccines will be broadly released this year.

High Cost Prescription Drugs. Carriers are rightfully concerned about the cost of specialty prescription drugs, such as gene therapies that can reach $2-3 million per member. Look at your large claim data and review any diagnosis related to leukemia, hemophiliac, cancers or any medical conditions that may cause a carrier to be concerned or to potentially impose million-dollar lasers due to specialty drugs. There are carriers that will immediately decline groups with members that have a medical diagnosis that can lead to future use of gene therapies, even if there is no gene therapy utilization today. There are patients that would rather continue their current therapeutic approach instead of exploring new gene therapies. It is the patient’s right to do so, but in terms of stop loss carrier underwriting, carriers may assume the worst unless verified through medical case notes that the patient is not considering gene therapies.

Change in Client Enrollment & Demographics. During this pandemic, we have seen employers decrease staff, ranging from 10-80%, and we have also seen employers increase staff by 10-30%. While traditional stop loss underwriters tend to review 2-3 years of past claims experience, any experience which involved a group enrollment change greater than 20% should be reviewed closely, as future utilization may be completely different from past claims experience. Large claimants may have terminated, past experience may represent utilization of members that are no longer enrolled in the plan, and/or demographic data today (for manual rating) may be vastly different from prior years’ demographic characteristics. It is important to remind carriers of any significant enrollment or demographic changes when considering past experience, as they may not be relevant for future projections or predictive modeling.

Understanding your own risks is crucial to successfully preparing for your next stop loss renewal and negotiating the best rates and terms for your group. Request your enrollment and utilization data early and analyze your own stop loss risks before sending them to the carriers so you can accentuate the positive attributes of your group and design a stop loss program that best fits your needs. Be sure to negotiate the information your carriers will be using in pricing your stop loss program - especially during these unprecedented times.

Contact the AssuredPartners Stop Loss Coalition team for more information regarding obtaining stop loss quotes, underwriting reviews, or assisting your group with the entire stop loss renewal process. Our goal is to help you get the best stop loss terms and rates possible for your employer plan.

For more information on stop loss coverage, please contact:

Jovita (JJ) Juanillo - jjuanillo@keenan.com, 310.212.0363 ext. 2531

E. Peter McNamara - pmcnamara@keenan.com, 510.986.6761 ext. 8130