Healthcare reform requires that companies eliminate annual and lifetime limits on their coverage, a development that may encourage more self-insured employers to buy medical stop-loss insurance to guard against having to pay too much in claims.
Ed Kaplan, national health practice leader at consultancy Segal Co., says companies that are considering buying such coverage should look at the volatility of their healthcare claims over the last three to five years, their cash flow and the amount of reserves they’ve set aside for healthcare.
Kaplan notes a study that suggests that high-dollar medical claims are increasing as a percentage of companies’ total claims, a trend he attributes to improvements in medical technology.
Smaller self-insured companies are much more likely to use stop-loss coverage. A 2011 survey by the Kaiser Family Foundation shows 90% of covered employees at self-insured companies with 200 to 999 workers are in plans with stop-loss coverage, vs. just 40% of employees at companies with 5,000 or more employees.
Stop-loss coverage is more important for smaller companies, Kaplan says, since the claims of a health plan that covers just 200 or 300 people tend to be more volatile than one that covers 4,000 people.