• National provider of employee benefit, insurance brokerage, risk and safety management solutions

• Established in 1887

• Privately owned and operated

• Headquartered in Dubuque, IA, with operations in 20 states

• 6th largest independent and privately held insurance broker in the U.S. (25th largest overall)

• Over 5,000 customers

COTTINGHAM & BUTLER OVERVIEW

COTTINGHAM & BUTLER RESOURCE CENTER

https://www.cottinghambutler.com/covid19/

Presented By |

STOP LOSS POLICIES: NOT ALL ARE CREATED EQUAL

Kevin Felderman | Assistant Vice President, Employee Benefit ConsultingDean Gilkes | Vice President, Group Benefits

May 12th, 2020

OBJECTIVES

• Understand the differences in policy language and the impact those differences could have in policy reimbursements.

• Understand the value and application of optional stop loss endorsements and enhancements.

• Be aware of the benefits and pitfalls of “carving out” stop loss from carrier provided claim administration.

• Covid-19 Implications

WHAT IS STOP LOSS?

Individual Stop Loss (ISL) aka Specific Stop Loss

• Protects the employer’s financial resources from large claims on any one individual

• Employer’s liability is capped at a certain collar amount on each individual per policy year

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

1 2 3 4 5

Large Claimants vs. Individual Stop Loss (ISL)

WHAT IS STOP LOSS?

Aggregate Stop Loss (ASL)

• Limits the employer’s overall claim exposure for a policy year

• Designed to cover what Individual Stop Loss (ISL) does not cover

• The aggregate is typically calculated by adding a risk corridor to the expected amount of claims- Risk corridor is commonly 120-125%

• Aggregate Limit (attachment point)

in this example is $2.0M

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Year 1 Year 2

Claims vs. Aggregate Stop Loss (ASL)

Claims

SELF FUNDED PLAN SPONSOR EXPOSURE

• A self funded health plan with unlimited plan coverage and no stop loss has no limit to the claim exposure.

• Specific stop loss with no lasers or policy exclusions reduces exposure to: # members x specific deductible Example: 400 members x $60,000 specific = $24,000,000

• What is the exposure with aggregate coverage?- Assume $2,000,000 attachment point and typical Aggregate coverage provides $1,000,000 of coverage

SPECIFIC COVERAGE

Items to consider when buying specific stop loss coverage

• Which carrier would you buy coverage from?Carrier ABC proposed premium = $600,000

Carrier XYZ proposed premium = $550,000

• Consider specific deductible amounts:

SPECIFIC COVERAGE

Items to consider when buying specific stop loss coverage

• Which carrier would you buy coverage from?Carrier ABC proposed premium = $600,000

Carrier XYZ proposed premium = $550,000

• Consider specific deductible amounts:

SPECIFIC COVERAGE

• Aggregating Specific Corridor (deductible)- a set dollar amount that is used to cover a single claimant or many claimants, that exceed

the individual specific deductible.

STOP LOSS POLICY COMPARISON

Contract Basis - Incurred and paid (12/12)- 3, 6, 12 Month Run In (i.e. 15/12)- 3, 6, 12 Month Run Out (i.e. 12/15)

Does my policy have run in limits?

Paid

STOP LOSS RELATIONSHIP TO PLAN

• Stop loss policy indemnifies the policyholder and is not a part of the health plan.

• However, the plan does become a part of the policy.

• The stop loss policy does not pay plan claims.- The stop loss carrier will not make plan

interpretations or payment decisions.

Employer

Stop LossPlan

Claim Funding Premium

Reimbursements

Reporting

STOP LOSS CONTRACT EXCLUSIONS

Are all claims covered by the policy?

EXCLUSIONS – SAMPLE #1EXCLUSIONS WE will not reimburse YOU for any loss or expense caused by or resulting from: 1. expenses Incurred while the Plan is not in force with

respect to the Covered Person, or for a person not covered under the Plan; 2. expenses covered by Plan changes made prior to OUR written

approval of such changes; 3. expenses which result from any prescription care service, mail order prescription plan or any prepaid prescription drug

plan, dental, vision, or weekly disability income benefits, unless specifically included on the Schedule and approved by US. 4. liability or obligations

assumed by YOU under any contract or service agreement other than the Plan; 5. expenses for services or supplies which are in violation of any law;

6. expenses for services or supplies billed above the Usual and Customary Charges for the area where provided or which are greater than the Plan

benefit; 7. expenses resulting from or caused by war, whether declared or undeclared, civil war, invasion, hostilities, riot or resistance to armed

aggression;8. expenses for an injury or sickness arising out of, or in the course of an employment for wage or profit and for which the Covered

Person is entitled to benefits under any Workers’ Compensation or occupational disease law, whether or not the Covered person has applied for

such benefits. 9. cost of the administration of claims, including cost of investigation, payments, or other service(s) provided by YOUR TPA, consulting

fees and/or expenses of any litigation; 10. expenses from an act while committing a felony; 11. any amount used to satisfy deductibles or

coinsurance amounts under the Plan; 12. expenses or costs resulting from non-contractual damages, court costs and legal fees, including but not

limited to compensatory, exemplary and punitive damages, fines or statutory penalties; 13. medical expenses in connection with Experimental or

Investigational surgery or treatment as defined in this Policy. 14. Payments recoverable through YOUR Plan’s Coordination of Benefits or similar

provision; 15. expenses Incurred by an employee or dependent of an employee of any affiliated or subsidiary company not included in the

Application, unless added by Endorsement; 16. legal expenses and fees including legal expenses and fees Incurred on behalf of any Covered Person

in obtaining medical treatment or expenses Incurred in connection with a judgment or settlement arising out of YOUR negligence in providing,

arranging, or falling to provide or arrange a benefit to a Covered Person; 17. Payments YOU make under YOUR Plan for services and supplies which

are not included in YOUR Plan or which are outside the requirements of YOUR Plan Document or this Policy; 18. expenses Incurred after the

Expiration Date; 19. in the event this Policy is terminated before the Expiration Date, expenses Incurred after the date of such termination; 20.

expenses Incurred by any COBRA Continue whose COBRA continuation coverage was not offered in a timely manner; 21. YOUR TPA’s failure to

provide timely Payment to providers which results in non-receipt of any discounted fees for services or supplies. WE will reimburse only for the

amount of the discounted amount had timely Payment been made by YOUR TPA

EXCLUSIONS – SAMPLE #2

MAKING A LEGALLY BINDING CONTRACT

• Offer- How does this happen

• Acceptance

• Consideration

Timing is everything!

OBJECTIVES

• Understand the differences in policy language and the impact those differences could have in policy reimbursements.

• Understand the value and application of optional stop loss endorsements and enhancements.

• Be aware of the benefits and pitfalls of “carving out” stop loss from carrier provided claim administration.

• Covid-19 Implications

SPECIFIC COVERAGE

Items to consider for Specific Coverage:

• Mirroring Endorsement

• Specific advance

• Lasers- higher specific deductible for an individual with a known condition that is likely to exceed the specific deductible.

• No Lasers Option (NLO) to include a not to exceed renewal rate

• Terminal Liability

AGGREGATE COVERAGE

Items to consider for Aggregate Coverage:

• Should I buy aggregate coverage?

• How much aggregate coverage should I buy?

• Monthly Aggregate Accommodation?

• Terminal Liability

OBJECTIVES

• Understand the differences in policy language and the impact those differences could have in policy reimbursements.

• Understand the value and application of optional stop loss endorsements and enhancements.

• Be aware of the benefits and pitfalls of “carving out” stop loss from carrier provided claim administration.

• Covid-19 Implications

CARVING OUT STOP LOSS

Factors to consider when “carving out” stop loss coverage from an Administrative Services Only (ASO) agreement?

• Price – Cost of the policy vs exposure

• Additional Administrative Fees

• Ease of administration - claims payment / filing

• Mirroring of claim administration

• Cash flow

• Policy Limits

• Carving out PBM

• Disclosure requirements

• Available reporting

• Timing of firm offer

Every employer has different strategies. Carving out and carving in both have their benefits.

OBJECTIVES

• Understand the differences in policy language and the impact those differences could have in policy reimbursements.

• Understand the value and application of optional stop loss endorsements and enhancements.

• Be aware of the benefits and pitfalls of “carving out” stop loss from carrier provided claim administration.

• Covid-19 Implications

COVID19

How will COVID19 affect the stop loss market?

COVID19

• Will claims decrease as a result of deferred (elective) services?

• Will claims increase as the result of COVID claims?

• If the plan’s claims decrease that doesn’t mean you will see significant reductions in stop loss rates/factors.

• Deferral or elimination of services in the current COVID period doesn’t mean those same services will be deferred in future years.

• Will there be a COVID second wave in the fall???

Questions?