After more than 25 years in stop-loss, I can say with experience that the stop-loss landscape is constantly evolving. Staying on top of the trends is the key to maximizing your coverage and taking advantage of your best options. One resource I rely on to understand the field is the Aegis Survey.
Now in its 14th year, the annual Aegis Risk Medical Stop-Loss Premium Survey is always an illuminating snapshot of the ways that American businesses utilize their stop-loss policies. The 2020 survey included responses from 483 plan sponsors, representing more than 822,000 employees and about $427 million in stop-loss premiums. It was sponsored jointly by Aegis Risk and the International Society of Certified Employe Benefit Specialists.
What can this year’s survey tell us? From rising catastrophic claims to dropping lasering rates, the data highlights all the stop-loss trends that self-insured employers need to know about right now. Plus, there’s some potentially hopeful news about how the COVID pandemic will affect employers at their next renewal.
Stop-Loss Trends: Premiums and Catastrophic Claims
The survey’s authors note that it’s “difficult, if not irrelevant” to calculate an average stop-loss premium cost. So many variables determine what a given employer pays in stop-loss premiums. According to this year’s survey, the average premium for a paid contract ranges from $10.61 per employee per month (PEPM) for a $1,000,000 individual deductible, to $151.20 PEPM for a $100,000 individual deductible.
What you may find more relevant is new data about the growing number of catastrophic claimants. The study asked respondents about the highest paid claimants they had incurred in one policy year, over the previous two years.
- 9% had a claim in excess of $2 million.
- 14% had a claim in excess of $1.5 million.
- 31% had a claim in excess of $1 million.
- 46% had a claim in excess of $750,000.
- 70% had a claim in excess of $500,000.
These results are similar to those found in last year’s survey, with one notable exception: the number of respondents who cited a $2M+ claim jumped by 50% between 2019 and 2020. More and more employers can expect to incur those big-ticket claims in the coming years.
Stop-Loss Trends: Lasering
One significant recent shift involves lasering (excluding claimants at renewal). This year, 21% of respondents reported at least one lasered claimant, up from 19% last year. A significant reason that this number is so low is that, for the majority of respondents, lasering isn’t currently an option.
In 2019, 53% of respondents had policies that prevented lasering; this year, 60% of respondents said their policies don’t allow lasering. Furthermore, respondents who said they aren’t permitted lasering and have a renewal rate increase cap rose from 30% last year to 46% this year.
Stop-Loss Trends: The COVID Effect
As the COVID pandemic continues to unfold, its effects on the stop-loss market haven’t yet been fully realized. It’s likely that the crisis and its resulting claims will affect premium pricing. The study’s authors expect a 15% market-wide leveraged trend for 2021 premiums, but note that some premiums may increase by closer to 20%.
However, the authors also note that COVID should have a relatively minimal overall impact on stop-loss enrollment and renewal. Only 10% of respondents said they were expecting a smaller enrollment at next renewal. Meanwhile, 27% said they were expecting enrollment to be higher at their next renewal, and 60% expected enrollment to be around the same.
Respondents were also asked about their approach to their next stop-loss renewal. Nearly half said they would approach renewal as normal, while 30% said they would seek competitive bids even if that meant changing policies and/or vendors.
More Stop-Loss Findings
- This year, 98% of surveyed plans include pharmacy coverage, holding steady from 2019. The study’s authors note that at this point, when pharmacy costs are so high, stop-loss policies without this coverage are ill-conceived.
- Interest in returning to a fully-insured policy was virtually nonexistent among respondents. During last year’s survey, when asked what risk management strategies they planned to review, 8% of respondents cited “reverting to fully insured coverage” as a potential option. This year, that number dropped to zero.
- In a break from tradition, this year’s survey omitted a question about who are the primary decision makers involved in respondents’ stop-loss coverage.
To plan sponsors that are looking to trim their stop-loss spending without sacrificing coverage, the survey’s authors offered the same suggestions they have in previous years:
- Be aggressive in finding and taking advantage of all discounts that your plan allows.
- Opt for stop-loss policies that match your health plan and offer laser-free renewals with rate caps.
- Work with a broker or consultant who has extensive knowledge of the complexities of stop-loss coverage.
Though I can’t predict the future, I’m always analyzing stop-loss trends to identify the new opportunities and challenges that my clients may face. The entire team here at Stop-Loss Insurance, Inc. is always here to answer your stop-loss questions and help you prepare for what comes next. Contact me today.
Denise Doyle is the President of Stop Loss Insurance Brokers, Inc. She has over 30 years experience in the industry and currently serves on the Health Care Committee of Self Insurance Institute of America.