Conversations Make the Hard Stuff Easier to Manage
Those who know me would probably say I tell it like it is and get to the point quickly. I’m not particularly sure that “blogging” is my thing, but I do know that we need to directly address some challenges in the current market. To do so, we have to be open to conversations – sometimes hard conversations – that allow us to honor our commitment to providing the right protection to meet the needs of our mutual clients.
Naturally, as a Stop Loss carrier, we are happy to see employers continuing to show interest in self-funding their health benefits. We also know that one driving factor of that interest in self-funding is the rising cost of health care. Keeping that in mind, employers who like the “control” provided through self-funding also must take charge and protect their bottom line with Stop Loss coverage.
The increase in health care costs and the continued influence of the Affordable Care Act’s unlimited maximum provision really highlight the need for Stop Loss protection. Today, claims more quickly exceed deductible levels, producing an increase in both the frequency and severity of shock claims that must be addressed. This leads to leveraged trend, an industry phenomenon that is a key factor in projecting Stop Loss rates.
For example, consider a claim that exceeds the Specific deductible in year one. Then, in the following year, the Specific deductible remains the same, and the same claim is incurred again. Due to an increase in medical costs in the second year, the same claim costs more, further exceeding the deductible level that was left unchanged from the first year. That said, the increase in the cost of the same claim creates a greater financial impact on the Stop Loss carrier.
In the current market, this is happening more and more frequently, and to ensure that the level of risk the carrier undertakes remains appropriate, deductible levels should be raised accordingly for the self-funded group. If the deductible is not adjusted appropriately based on the group’s experience, Stop Loss premium has to increase to protect the financial solvency of the Stop Loss carrier.
Clearly, rate is a difficult subject to address, but we have to have the conversation. Don’t we all want to ensure protection? It’s certainly necessary to everyone involved – self-funded employers want to protect their bottom line; Stop Loss carriers have to protect their financial stability; and brokers need to protect their reputation with their clients. With this in mind, the best Stop Loss carriers work to guard their policyholders’ financial wellbeing by safeguarding their own ability to do so. And knowledgeable brokers communicate the importance of this approach, demonstrating that the value of choosing the right Stop Loss carrier extends far beyond the cost of the coverage.
In this market in particular, it is important to profitably underwrite and select business that is sustainable. It also is important to work together over the long term while helping our mutual self-funded clients protect against catastrophic loss. To do so, we must commit to a partnership that embraces experience-backed guidance and consistent risk evaluation on new and renewal business. Then, clients can experience the stability of coverage that works to guard their financial health as claim costs continue to rise. Be open to communication – early and often – and address the hard stuff with confidence.