Employer Stop Loss—can we really do that?

This article is part of a series of case studies—real stories of how managed care companies increased profits by using Summit Re’s resources to increase sales, decrease expenses, and manage claims. Offering your provider networks and care management programs to self-funded employers may be a key area of expansion and one that builds on your core competencies.

We have a long history of working with HMOs that contract with TPAs or establish their own ASO capabilities for the employer stop loss business. Our background in the managed care reinsurance market allows us to understand the challenges our clients face and present a wide array of solutions.

In fact, we are so committed to this effort, we explicitly mention providing employer stop loss products and services in our Founding Principles.

Range of services

In most instances, HMOs look to us for competitive stop loss quotes that reflect the savings associated with accessing their networks and care management programs. In some instances, however, HMOs have a properly licensed insurance company and are interested in becoming risk takers. They would like to offer employers a complete stop loss platform, including administration, provider networks, care management programs and stop loss coverage. Since most HMOs do not have the stop loss coverage expertise on staff, Summit is able to act as a managing underwriter—performing pricing, underwriting, policy issuance and claim functions.

Case study background

Company ABC is a very successful HMO operating in two locations. The company historically used a handful of stop loss carriers to offer specific and aggregate coverage to its self-funded groups. During one of our visits, we asked a simple question: “Why don’t you consider writing employer stop loss coverage through your insurance company, rather than somebody else’s?”

They called us back the next day and said, “Did you really mean it? Can we really do that?” We said yes, and the rest is history.

Taking control

This HMO moved the majority of its business from its previous carriers to the HMO’s insurance company. Company ABC staff members have the flexibility and control to meet marketplace conditions with respect to pricing and underwriting, including the setting of appropriate rates, lasers, and binding limits prior to the effective date of coverage. While Summit Re makes recommendations on pricing and underwriting guidelines, Company ABC ultimately decides what terms and conditions it chooses to offer employer groups, since the health plan’s insurance company affiliate is assuming the risk. Even though Summit Re does the actual underwriting, policy issuance and claims adjudication for this client, the client retains the authority to make all final decisions.

In addition to our day-to-day involvement with Company ABC, Summit Re lined up excess-of-loss protection for its employer stop loss portfolio after Company ABC absorbs a corridor of risk.

Results

The deal has worked out just as the HMO and its affiliates had envisioned: the marketplace reaction was favorable.

• Clients knew the HMO had been in the marketplace for over 25 years and its B+ rating was more than acceptable (Weiss).
• The HMO brought strong provider contracts and case management capabilities to the employer stop loss product.
• The plan had good relationships with brokers, agents and customers in the marketplace.
• It could now offer a fully branded product including its provider contracts and network management capabilities, its TPA services and its employer stop loss policy.

In the words of Company ABC, “Summit Re met all of my service requirements. Things are great from our perspective. We look forward to a long relationship with Summit Re on this product line.”

Although this client didn’t need it, Summit Re was available to provide sales and marketing training to HMOs who are new to this self-funded marketplace. Summit Re is also in a position to recommend consultants who assist HMOs in setting up their own administrative shops and in getting their stop loss policy forms and rates filed with departments of insurance.

This approach won’t fit everybody,but is it right for you?

Best of Both Worlds: Self-Funding and Managed Care

To control the rising costs of providing a medical benefit program, some employers look to self funding. HMOs that can offer administrative services only (ASO) or affiliate with third party administrators (TPAs) can bring both a self-funded approach and managed care programs to employers.

Selecting an MGU

HMOs who participate in the employer stop loss market should carefully select a managing general underwriter (MGU) with expertise in both managed care reinsurance and the self-funded market. Your MGU should also have full-service capabilities. Summit Re is a full-service MGU focusing on HMOs who participate in the employer stop loss market. Our managed care experience sets us apart from traditional employer stop loss carriers and managing underwriters.

Pricing and Underwriting

Summit Re’s staff of underwriters and actuaries is dually equipped to understand this combination of funding and managed care savings. We apply our knowledge in the development of competitive stop loss rates and aggregate funding factors for your self-funded clients. As one of the market leaders in HMO excess reinsurance, we have a unique understanding of HMOs and their excess medical risk. We review not only your provider contracts, but also your managed care protocols and your HMO experience.

Sales Support

Summit Re takes an active role in helping you place self-funded business. We are a phone call away to discuss strategy on individual accounts. In unique situations, we can assist you in the on-site presentation of the stop loss proposal to the employer. Once a group is sold, we focus on servicing the account.

Integrated Administration

Our rating and proposal system is fully integrated with our stop loss contract production, premium collection, and claims payment modules. This results in proposal-based policy issued quickly, accurate premium accounting, and timely claim payments. We also have an experienced staff in each functional area to ensure that personalized service isn’t forgotten.

Risk Transfer Flexibility

Summit Re works with two carriers who provide the employer stop loss product: Companion Life Insurance Company and Presidential Life Insurance Company. These two carriers allow Summit Re to write this product in all 50 states.

If you want to retain some of the risk but do not have an insurance company, there are certain approaches we can use that allow you to assume a portion of the risk written by one of our insurance company partners and managed by Summit Re.

If you have an insurance company to write the employer stop loss product, your carrier can keep some or all of the risk. Summit Re can provide some or all of the MGU services, or your insurance company can perform all the functions with Summit Re providing consulting services in specific areas.

Summit Re’s goal is to be creative, responsive and entrepreneurial, to help you meet your strategic goals for employer stop loss, whatever they may be!

Add Lives Under Management with Employer Stop-loss

Many employers turn to HMOs and other strongly managed care programs to control healthcare costs, while others look to the cost-control aspects of self-funding. HMOs that can offer administrative services to self-funded employers bring the best of both worlds. To take advantage of this opportunity and to increase your lives under management, you need actuaries and underwriters equipped to understand this combination of funding and managed care savings. Summit Re'’s level of managed care experience sets us apart from others in the self-funded marketplace that experiment in the managed care world.

Key strengths that we bring to you include our ability to analyze managed care networks and develop customized specific and aggregate stop-loss rates uniquely reflecting your managed care capabilities. We have a flexible policy with numerous product options. We deliver excellent service in all regards, including underwriting, proposal turnaround time, premium, claim, and contract administration.

We use Companion Life Insurance Company, an A+ rated carrier, as the insurance company providing specific and aggregate stop-loss protection. You may use your own TPA or contract with a TPA in the local market.

Summit Re can offer your sales and marketing staff a turnkey stop-loss program using Companion Life Insurance Company policy forms. Alternatively, we can work with you to use your own insurance company paper if available. Consulting services are available to help you place the business, to underwrite cases and to develop pricing and underwriting guidelines as well as manual rates.