The basic premise of any alternative risk transfer (ART) program is to decrease an employer's ultimate cost of retaining risk. Whether using self-insurance or a captive, the employer will need to engage a series of independent service providers to structure, manage, and secure the program.
For a self-funded healthcare program, this list would include third party administrators (TPAs), PPO networks, and large case management (LCM) providers. Medical stop loss captives would add a captive manager, asset manager, auditor and attorney to the list. The focus of this discussion is the evaluation and selection of Medical Stop Loss Carriers.
As more employers self-fund their employee healthcare coverage, cost-saving has become even more critical.
Self-funded employers can design plans having an increased focus on controlling and reducing the risk to generate greater loss-cost savings. Reference-based pricing, direct provider contracting, increased use of alternative provider networks, and “medical tourism” are examples of increasingly popular strategies being implemented by self-funded programs to reduce hospital charges. Even a change to a more appropriate provider network can yield significant savings.
This white paper provides an overview of some of the modern tactics used to reduce healthcare charges.
QBE released a white paper, Demystifying Medical Stop Loss Lasers, published in Captive Insurance Times, March 2017.
Within self-funded medical programs, individuals having serious ongoing medical conditions that are likely to incur large expenses related to those conditions, are "known" risks that are frequently isolated by a stop loss carrier to receive a higher specific deductible in relation to the rest of the insured population. Isolating specific individuals for a higher stop loss deductible is known as "lasering" and has always been a common practice in the medical stop loss industry.
Lasers will always be a part of most self-funded plans, especially as the cost of large, potentially catastrophic claims continues to increase. Since ACA, the cost of large claims has increased dramatically. Many claims that used to cost $100,000 or $200,000 are now regularly eclipsing $500,000 or more, and the frequency of $1M+ claims has risen to unsettling levels. With the growth and increased frequency of large claims, it is safe to assume that the application of lasers by stop loss carriers will also continue to increase.
QBE has released a white paper titled "Cyber Liability Risk on the Rise Due to Court Decisions: Implications for Companies in Structuring an Insurance Program" that closely examines three recent court decisions and the increased threat of class action litigation due to a data breach. These examples explore where the court has ruled in favor of the plaintiffs and how this ever-evolving legislation will continue to change the landscape of protecting customers’ personal information.
Most companies will experience a data breach at some point, whether from a computer glitch, a hacker, or an unfortunate employee mistake. Cyber risks are a growing threat and many organizations aren’t prepared to react effectively if they experience a security breach. The costs of such an incident can be steep and long-lasting, including losing customer confidence and shareholder value. According to PwC’s 2016 Global Economic Crime Survey, only about one in three organizations had a fully operational response plan for cyber incidents, and a similar proportion had no plan at all.1
The white paper examines how customers must be proactive in mitigating the risks of security breaches and must respond quickly if one does occur. It also summarizes how companies can develop a solid preparedness and response plan coupled with a strong cyber insurance program.
Stories abound of how social media has opened an entirely new channel of communication for scammers willing to commit fraud, but insurance companies are increasingly turning the tables by using social media to detect fraudulent claims. The paper notes several examples of claimants publicly sharing facts of their lives on social media that contradict the basis of their claim, such as semi-pro athlete playing well in local sports leagues while collecting workers’ compensation benefits. Insurance fraud costs the industry an estimated $80 billion a year—with some studies suggesting that as much as 10% of all property and casualty claims are scams. Finding new methods to fight fraud is critical to keeping premiums down and policies affordable.
The paper also notes that forward-thinking carriers are continuing to expand the ways social media can help improve the customer experience, such as:
- After a natural disaster, monitoring social media can help insurance companies identify the most affected areas and thus more quickly deploy loss mitigation and recovery resources.
- Similarly, social media information may reveal situations of increased risk and better enable insurance companies to suggest safety measures that could prevent loss.
- Finally, social media information can help the insurance company learn of developments that warrant updates in coverage, such as a home renovation project that requires builders’ risk insurance.
QBE North America released a new white paper about the risks of supply chain management, focusing on the effects of globalization. Titled "Does Your Supply Chain Harbor Hidden Risks?", the paper provides an overview of key areas of risk that tend to impact multinational and domestic companies – both the companies themselves, as well as their many suppliers. This white paper outlines seven vital areas of supply chain management for multinational and domestic organizations to consider, ranging from manufacturing site safety and labor conditions to quality control and cyber security. It also examines strategies to address supply chain risks and key insurance coverages to mitigate these risks.
QBE North America released a white paper about the increased use of medical stop loss captives by companies that self-fund their employee health insurance plans. Titled "Medical Stop Loss Captives: Issues and Answers," the paper attributes the recent growth to several factors:
- Large companies that did not need to pair medical stop loss with their self-funded plans now find the coverage necessary due to rising healthcare costs, as well as mandates in the Affordable Care Act (ACA), such as unlimited lifetime benefit maximums.
- Large companies that already had a self-funded plan and medical stop loss coverage are looking for more efficient methods to finance that coverage.
- An increasing number of medium and small-sized companies are converting to self-funded plans to manage the cost of complying with the ACA. As they do, they need medical stop loss coverage, and insurers are developing new group captive structures in response
1PwC, Global Economic Crime Survey 2016. Retrieved from https://www.pwc.com/gx/en/economic-crime-survey/pdf/GlobalEconomicCrimeSurvey2016.pdf