Insurance encompasses a vast range of practices and phrases that may be unknown to someone who does not work within the industry. When researching stop loss insurance and its benefits, this terminology can become confusing and frustrating. In this post, the stop loss insurance term “laser” is dissected.
What does “laser” mean in stop loss insurance?
A laser is the practice of assigning a higher Specific deductible for an individual with a known condition that is likely to exceed the Specific deductible. It is essentially used when an individual on a plan possesses a higher pre-disposition for illness or higher health care costs than other employees.
What is the benefit of lasering?
Rather than raise everyone’s rate, the insurance carrier adjusts the coverage for that one claimant, raising the maximum out of pocket, to later be paid by the employer. This process allows other employees’ rates to stay low and unaffected.
Since rate increases are based upon the majority of rates within a plan, keeping the rates as low as possible will likely result in any increases the following year to start from a lower rate. Without lasering, all rates would raise to address the claim. A rate increase would inflate these costs.
When can lasers be used?
Typically, a laser is utilized when the stop loss market tightens up, therefore decreasing competition among insurance carriers. A self-insured plan can only absorb a couple of lasers. Lasers should not be employed to address all high health care costs a self-insured plan may have.
Though not necessarily mandated, lasering remains a common practice in the stop loss insurance industry. If you would like to discuss more about how your business can benefit from lasers, please contact us.