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Welcome to The Healthcare Savings Quarterly!
This publication is designed to provide useful, timely and actionable information on a host of topics impacting the health insurance and healthcare markets. Each quarter we identify a "hot topic" in the market, and solicit articles from industry leaders to provide varying perspectives on issues and opportunities.
If you are a Self-Insured Employer, Payer, Labor or Trust Organization, Stop-loss Carrier, Health Plan, or a business that services this market, this publication can be a useful source of information and guidance.
We hope you find this valuable and encourage your feedback, including future topics on which you would like information. |
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Projecting the Future for the Employer Stop Loss Market
By Travis Micucci, President, Munich Re Stop Loss, Inc.
Projecting the future of the Employer Stop Loss Market requires trend analysis, review of multiple market factors, and detailed examination and probability assignment for the occurrence of external events.
All other things being equal, the Stop Loss market will continue to grow as the number of self insuring employers continues to grow. Current estimates put the overall size of the Stop Loss market at between $10 and $14 billion - that's a large spread, but it's due to the way some of the larger insurers classify this product on their financial statements.
Several factors within the Affordable Care Act have had the unintended effect of tilting the playing field towards Self Insurance and against Fully Insured medical insurance. These include:
- The Health Insurance Tax, which began as a large number ($7 billion in 2014, growing to $13 billion five years later) that is apportioned among all fully insured health plans. These plans are pushing this tax straight through to the consumers, and it increases their premiums by about 2% in 2014, and rising each year. This tax does not apply to Self Insuring Plans, so regardless of any other considerations, Self Insurance has been given a 2% cost advantage. As more groups leave the fully insured space, the number of people paying that tax decreases, so the share that each insured person has to pay will increase.
- Additionally, Small Groups that are required (in the Fully Insured segment) to undergo community rating have seen the number of age-bands compressed from either 5 or 7 bands down to 3. The impact of this is to essentially require small and healthy employee groups to subsidize the older and less robust groups. Employers with especially young and healthy employee populations can opt out of that space by self insuring, thereby taking advantage of their favorable demographics. This also has the additional effect of removing many of the younger and healthier people from the community rating pool, causing the overall block of remaining lives to look less healthy (and become more expensive to insure).
- Another feature within the Affordable Care Act worth reviewing is called "The 3 R's" and consists of Risk Adjustment, Reinsurance, and Risk Corridors. These 3 programs act independently to protect insurers operating in the new Health Insurance Exchanges from the possibility of taking on more health risk than they are able to adequately handle. Without the ability to perform individual underwriting, the Exchanges guarantee coverage to all who apply. This creates the potential for insurers in the Exchanges to experience anti-selection, and pick up a larger than anticipated share of high claim members. To guard against this potential, the government has created the 3 programs to shift premiums from those carriers who experience low claims activity to those carriers experiencing high claims. However, in 2017 two of these programs will expire (leaving only the Risk Adjustment program in place). This will potentially remove some stability from the Exchanges, and may cause rates to rise. Even though this is for the Individuals Market Exchanges, if rates rise, it may become less of an option for small employers who might have otherwise subsidized employee coverage through the Exchanges.
- One final feature worth noting in 2017, States may permit the sale of fully insured group plans on Exchanges (called SHOP Exchanges). This will likely extend community rating (as previously mentioned) and require the provision of mandated health benefits, all of which would continue to make Self Insuring an attractive alternative.
But not everything that is occurring in the market will potentially benefit the Self Insurance marketplace.
Some of the State Health Insurance Exchanges are operating in the red, and are looking for new and untapped sources of funding. Since Self Insuring Employers are not easily identified by the State Departments of Insurance (since it's not insurance), the TPAs that administer the self insurance programs are coming under scrutiny. Will States create taxes or fees for the TPAs to pass along to the employers? It is under discussion in some jurisdictions.
Additionally, there have been and currently are several State based legislative developments that could restrain Self Insurance growth:
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State
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Initiative
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California
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Stop Loss
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Connecticut
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Exchange Assessments
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District of Columbia
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Stop Loss
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Maryland
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Stop Loss
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Minnesota
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Stop Loss
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New Mexico
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Exchange Assessments
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New York
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Stop Loss
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Rhode Island
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Exchange Assessments
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Utah
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Stop Loss
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Some of these initiatives refer to potential restrictions on the lowest attachment point available through stop loss insurance. The smaller the employer, the greater the chance for claims volatility, which speaks to a need for a lower attachment point. Some legislators believe that attachment points at extremely low levels ($5,000) amount to nothing more than a fully insured plan with a high deductible. Along these lines, several States are installing minimum attachment points just to keep a distinction between fully insured and self insuring plans with stop loss coverage.
Some States, such as New York, are enacting legislation that restricts the entire form of self insurance to employers with less than 100 employees (as of 1/16/2016). This completely sidesteps the issue of low attachment points for small groups by eliminating small groups from the discussion.
On the whole, this market will continue to grow because Self Insurance allows employers a lower cost alternative than full insurance, and contains fewer fees and taxes than full insurance.
This article was contributed by Travis Micucci, President of Munich Re Stop Loss, Inc. Travis can be reached at TMicucci@MunichReStopLoss.com.
About Munich Re Stop Loss, Inc.
Munich Re Stop Loss Inc., (MRSL) a subsidiary of Munich Re, is an industry leader in Employer Stop Loss insurance. As part of Munich Re, MRSL has the ability to leverage a global knowledge base to develop and deliver innovative, forward-thinking risk solutions to help our clients manage risks in a complex and evolving world. MRSL continues a tradition of excellence by using technical knowledge to help clients manage risks, and optimize their business results, and by working closely with brokers and TPAs to find the right solutions for employer and provider groups. MRSL understands that stop loss insurance policies need to be altered to fit each clients' needs. So MRSL offers plan policy options and alternatives that help employers manage their healthcare program.
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Cost Containment Strategies Lead 2015 Trend Expectations for Stop Loss
By Beata Madey, Senior Vice President, Underwriting, and Domenic Palmieri, Senior Vice President, Operations and Strategic Partnerships, at HM Insurance Group
It's no secret that the Stop Loss market remains soft. Both predatory and commoditized pricing exist and influence sales. Some national producers are looking to gain clients through a coalition approach to marketing Stop Loss that was created to enable contained group purchasing and advocacy situations, while potentially managing the coverage through shared efforts and relationships. And Stop Loss carriers are facing increased competition in the self-funded space as fully insured carriers increase their share of the Stop Loss market.
At the core of everything, however, is cost. Carriers, producers and groups all face a rising claims trend that's growing in both frequency and severity. The challenge in 2015 is how to contain it.
Claims Trend Continues
As the year begins, we anticipate a continuation of the claims trends seen in the prior year. Unlimited maximums, immature provider network reforms and increasing pharmaceutical costs are a few of the drivers of higher claims. Without widespread mechanisms to control medical spending, the market will continue to see large claims tied to evolving medical procedures. There have been steady, or eroding, network discounts, while more costly medical treatment options and procedures are taking place.
Additionally, there has been an increase in large claims related to premature births. This exposure has the potential to increase in 2015 as more couples choose to start or increase families in the improving economic climate. Unfortunately, many of the facilities attending to premature infants offer very low discounts for care. In fact, it is not unusual to see discounts of just five percent off of billed charges.
Ever-increasing pharmaceutical costs will continue to play a significant role in the market as well this year. We will see increased costs related to specialty drugs, as well as with established brand and generic medications. As specialized and biologic products are developed and launched, there will be a push to treat patients with newer, more expensive medications. The pipeline for new drugs is enormous, and pharmaceutical companies are working on biogenerics, biosimilars and biobetters - each with its own role in the space - providing more options and greater costs. We also see mergers and acquisitions among pharmaceutical companies and pharmacy benefit managers (PBMs), creating less competition in the marketplace and increased prices.
TPAs Provide Front Line Control
Third Party Administrators (TPAs) are on the front line of benefit administration and cost management initiatives. They continue to play a critical role in assisting in benefit plan design, plan administration and cost containment. Administering benefit plans in the current reform environment requires a thorough knowledge of the benefit plans, regulatory requirements and treatment options. TPAs that are able to provide both effective and efficient services will continue to thrive in the future.
Cost Management Strategies Tackle Issues from All Angles
Some of the cost containment approaches that can help to manage this challenging situation are innovative plan design, better coordinated information on disease therapies, proper vendor utilization and questioning charges that appear to be inflated.
Plan Design
Employers can gain better control of claim outcomes with a well-designed plan document. They should review their plan documents with their benefit consultants and legal professionals to ensure that the benefits offered are in line with what is intended, while meeting the regulatory minimums. Small tweaks can lead to substantial savings. For example:
- Eligibility can come into question. An employer's current plan may cover dependents of dependents. While this may not be required from a regulatory perspective, the employer needs to review and confirm the intent to provide the right level of coverage.
- Prior-authorization can provide savings opportunities. An employer may want to consider requiring pre-authorization for dialysis services. Knowing about the need for dialysis prior to actually initiating services provides the opportunity to contain costs through directing care to in-network providers and/or negotiating cost of services up front.
Coordinated Information
TPAs can utilize internal medical staff, consultants, PBMs and Stop Loss carrier staff to review various options for effective treatments at more reasonable costs. While medical developments continue to grow exponentially, the treatments need to be vetted for effectiveness, as well as for cost. Newer isn't always better. Many of the tried and true therapies will still achieve the desired results at a much lower cost. The sharing of information can aid in formulating the most effective treatments at the best price for the patient at hand. Employers also should initiate discussions with their TPA and PBM to ensure that if the PBM offers any type of rebate program, the employer is fully aware and in agreement with how those rebates are handled and distributed.
Vendor Utilization
Utilizing external parties to supplement cost containment capabilities can pay dividends when the timing and circumstances are appropriate. These vendors cover a wide variety of services, including the drafting or review of plan documents, medical re-pricing services, dialysis and more. Early intervention is the recurring theme in using these external resources. Identifying the appropriate situation in which to introduce their expertise and doing it in a timely manner will likely lead to better results.
Addressing Excessive/Egregious Charges
Employers should ensure that their claims administrator has processes in place to identify and address excessive and/or egregious charges. Some areas where excessive charges often occur are with spinal and other orthopedic implants, as well as with cardiac devices such as pacemakers, Automated Implantable Cardioverter-Defibrillators (AICD), ventricular assist devices, external life vests and stents.
When situations are encountered where the possibility of excessive charges exists, the supplier invoice can be requested to confirm the actual cost of a device/implant, and payment can be limited accordingly.
Price Transparency Brings Potential Solution and Many Questions
There is a movement toward price transparency in the health care marketplace. Proponents believe that publishing price information can help to control the wide range of costs people pay for the same procedure, while lowering the price ceiling in general. When consumers know exactly how much something costs, they can compare prices before making a decision.
Price transparency gives consumers an opportunity to shop by comparison for health care just as they would for other purchases they make in their lives. This creates a situation where higher priced providers feel pressure to lower their costs to remain competitive. When prices are transparent, however, some carriers believe that this removes their opportunity to negotiate with providers to get the best price for their clients - in secret. So, with this theory, prices could rise for some consumers if negotiations are no longer possible.
As prices become transparent and costs are lowered on medical procedures, self-funded groups may find that they do not reach their deductible levels, or at least not as quickly. This would be positive in the Stop Loss community as it would help to deter the increase in the frequency and severity of catastrophic claims exceeding $1 million or more.
As producers, carriers and groups work to determine how they can provide the best, most comprehensive coverage to group employees, thoughtful cost containment strategies must be executed while continuing to offer quality care and promoting healthier populations.
This article was contributed jointly by Beata Madey, Senior Vice President, Underwriting, and Domenic Palmieri, Senior Vice President, Operations & Strategic Partnerships, at HM Insurance Group. Beata can be reached at beata.madey@hmig.com, and Domenic can be reached at domenic.palmieri@hmig.com.
About HM Insurance Group
Headquartered in Pittsburgh, HM Insurance Group is a recognized leader in risk management. HM's product portfolio features employer stop loss and managed care reinsurance. The company also offers workers' compensation in Pennsylvania. HM Life Insurance Company, HM Life Insurance Company of New York, HM Casualty Insurance Company and Highmark Casualty Insurance Company have "A-" (Excellent) ratings from A.M. Best Company. Through its insurance companies, HM Insurance Group holds insurance licenses in 50 states and the District of Columbia and maintains 23 regional sales offices across the country. For more information about HM Insurance Group, visit hmig.com.
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Greater Flexibility in Stop Loss Options in 2015; Choose Wisely
By Maria K. Iarossi, Director, Consultant Relations, United Claim Solutions.
Employers and/or Plan Sponsors that purchase stop loss coverage have lots of choices when it comes to who provides the coverage; i.e. a direct writing carrier, an MGU or a captive. They also have to select the parameters of the stop loss coverage that they think will provide the most comprehensive protection against catastrophic, unpredictable claims. The choices made could provide peace of mind for the self-funded plan, or could result in unexpected financial liability, potentially resulting in cash flow issues or, worst case, bankruptcy. I say all of this to emphasize how important it is for an employer to work with a consultant and/or broker that really understands the dynamics of a self-funded plan and stop loss coverage. The devil is in the details, and trusting the financial well being of your company to individuals who don't specialize in self-funding can be a disaster waiting to happen.
Trends and key factors
In recent years, smaller employers (25 to 150 employees) have begun to consider, and in many cases have moved from a fully-insured to self-funded financial arrangement. Some of this activity is the result of the implementation of the affordable Care Act (ACA), and the concerns it created within the small group market. This shift by the smaller employer opens opportunities that may not have existed before within the medical carrier market; i.e. the BUCAs, but also with the stop loss industry as a whole. New products have been introduced to attract the small employer, such as a level funding option, minimum premium (although minimum premium isn't new, it's new in the sense that it's offered to smaller employers), spaggregate coverage, and captives. In fact, the introduction of captives to the small employer market appears to be gaining traction. An example of the type of captive that could be attractive to smaller employer is a "sponsored" captive. A sponsored captive typically has individual segregated cells that are "rented" in order to establish an insurance program. Thus, multiple small employers may participate in the same "sponsored" captive with the intent of spreading the risk amongst all "rented" cells within one captive. With any captive, containing the cost of claims is imperative to the future viability of the captive because any shortfall (in premium dollars collected compared to the amount of claim dollars paid out), will have to be funded by the captive participants with additional premiums paid into the captive beyond the initial funding amounts established for the plan year.
The impact of the ACA
As mentioned earlier, self-funding has become more attractive to employers because of ACA regulations. Not only did the ACA not "control the cost" of healthcare, it actually added to the cost with additional fees and taxes, mandated benefits (essential health benefits), and limits on the amount of cost shifting that can occur between the employer and the employee via the plan design and employee contributions.
Since claims cost is the largest portion of the overall financial exposure to a self-funded Plan Sponsor, representing between 80% and 90% of the overall cost of a self-funded plan, controlling the cost of claims is paramount to the ongoing battle to keep the overall cost of healthcare affordable for both the Plan Sponsor and the employee. A study conducted by HM Insurance Group on its block of stop loss business showed that, "from 2009 to 2013, claims incidence per 100,000 employees tripled at the $1 million or higher mark; increased 2.5 times above $750,000; and more than doubled for claims above $500,000. Such significant increases, in turn, are driving up the cost per employee per month. In fact, claims costs reaching the $1 million mark and beyond have increased nearly four times."*
In addition to the increase in the number of catastrophic claims we've seen a rise in the cost of diagnosis that result in large stop loss claims. Cancer has been the number one high-cost claim from 2008 to 2012. The other types of large claims in 2012 were heart disease, trauma treatment, neonatal care and renal conditions.*
What's a Plan to do?
Given this information, it would make sense for a Plan Sponsor to actively identify cost-containment solutions that could assist the Plan with controlling the cost of these key diagnoses. This is where your Consultant, Broker, TPA, Stop Loss Vendor or Captive can provide guidance. Not only are the PPO networks and strong medical management key in in keeping claim costs in check, a strong cost containment company can also play a crucial role in assisting the Plan in aggressively reducing medical costs through out of network claim negotiations, supplemental PPO repricing, bill editing and bill audits. And the Plan should not focus on higher dollar claims; the impact of effective cost-containment on small claims can have a very significant cumulative effect for the Plan and the member.
In my opinion, the future of employer sponsored self-funded plans is predicated on finding ways to mitigate the cost of claims so employers can continue to offer medical benefits as a way to attract and retain key talent. Otherwise, the cost will become financially unsustainable and employer sponsored medical plans will be phased out, similar to the demise of defined benefit pension plans.
*HM Insurance Group, Stop Loss News, June 2014 Edition, "HM Monitors Claims Cost Trends for Prudent Decision-Making"
About United Claim Solutions (UCS):
UCS is an innovative Medical Cost Reduction and Claim Flow Management company. It is one of our primary missions to be a resource to Consultants, Brokers, TPAs, Stop Loss Vendors and Captives to help mitigate the cost medical claims; whether the claim is in or out of network. For example, UCS has a very cost effective solution for cancer care through its relationship with Cancer Treatment Centers of America (CTCA). We also have a unique and very cost effective approach for reducing dialysis claims (associated with renal conditions). By reducing the cost of medical claims, and especially high dollar claims, stop loss renewals may be positively impacted, with lower renewal rates and/or lower laser amounts on known catastrophic claimants. For additional information please contact Maria K. Iarossi, Director, Consultant Relations at 866-762-4455 x 140, or via email at miarossi@unitedclaim.com. Please also visit our website at www.unitedclaimsolutions.com.
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The 2014 Aegis Risk Medical Stop Loss Survey
Executive Summary
This year's survey, its eighth year, reflects rising stop-loss premiums, the near elimination of annual or lifetime limits, and a strong commitment to employer-sponsored, self-funded health plans. Further insight is provided on the increased involvement of finance and risk management staff in the stop-loss coverage decision as well as on the rising frequency of truly catastrophic claimants-with nearly a quarter of respondents reporting a claimant in excess of $1 million over the last two policy years. An additional update is provided on individual stop-loss deductible by employer size and other coverage provisions, including aggregate stop loss. The primary focus of the survey remains current premium rates, as shown in the following graphs and tables.
For the full survey please click the link below:
2014 Aegis Risk Survey
About the Survey
The annual Aegis Risk Medical Stop Loss Premium Survey is open to plan sponsors, brokers, consultants, TPAs and carriers. Group name is not needed. The 2015 Survey opens late Spring. Visit www.aegisrisk.com to register for notification. All participants receive an immediate copy upon its release, scheduled in August.
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UCS Update: We had an outstanding 2014 for savings
We're proud to announce that for 2014, we were successful on 88% of the out-of-network billed charges received for repricing, with an average savings of 45% nationwide. These numbers represent a significant increase over last year, when UCS posted a success rate of 82% and an average savings of 40% nationwide.
Additionally, we grew our business by over 45%, in large part due to our highly effective Bill Audit/Review services, and Direct Negotiations
"We have continued to increase our success percentage and average savings on out-of-network medical bills year after year. Our industry leading savings are a direct result of our focus on negotiations, bill review, and bill edits to impact out-of-network medical bills, in addition to utilizing Supplemental and Wrap PPOs when appropriate. We have developed strategies to further increase our savings impact for clients, including contracting with key providers. For example, through our diligence and proactive efforts we can now provide our Clients access to Cancer Treatment Centers of America® at a cost that is comparable or even less than other cancer care options." said Joshua Carder, President at UCS.
To learn more about UCS please contact Corte Iarossi, VP, Sales & Marketing at 866-762-4455 ext. 120, or at ciarossi@unitedclaim.com
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Issue: 8
Stop-Loss; What Can We Expect in 2015?
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