Stop-loss insurance is similar to purchasing high-deductible insurance. The employer remains responsible for claims expense under the deductible amount. There are two types of stop-loss insurance – specific and aggregate.

Specific stop-loss protects the employer from expenses that exceed a deductible amount on each covered person. Claims in excess of the individual specific deductible are reimbursed to the employer by the stop-loss insurance carrier. Deductible amounts are determined based on the number of expected employee claims and the employer’s risk tolerance.

Aggregate stop-loss protects the employer against higher than expected claims. If total claims exceed the aggregate attachment point, the stop-loss insurance carrier reimburses the employer for the amount over the limit. The reimbursement takes place at the end of the contract year.

Specific and aggregate stop-loss are usually purchased together. However, as employers become more comfortable with self-funding and take on appropriate catastrophic thresholds, claim flows become more predictable and larger employers will typically drop aggregate insurance.

Last 10 Years of Stop-Loss Underwriting

In the mid 90’s, the stop-loss market saw an enormous growth of first use the term MGU stands for (MGUs) in the marketplace. MGUs are underwriting intermediaries. At the peak of MGU activity, there were approximately 400 vendors from whom one could purchase coverage. In order for many of these vendors to gain a premium base and market share, low rates were offered. With the large number of markets to choose from, many groups selected their stop-loss vendor based solely on rates. At that time, this was a good strategy for employers wishing to reduce the cost of their self-funded plan. Many vendors offered the same service and the rates were very attractive. The employer knew there was always another vendor to fall back on.

The consequences of these actions were reaped in the mid-to-late-90’s. Losses from the underpriced policies began to hit the books. Many carriers that “fronted” the MGUs began to cancel their treaties. It was not too much longer until the reinsurers began to question the transactions of the MGUs. The claim authority of the MGUs was lowered as the carriers and reinsurers began to review claims. This process slowed the turnaround time of reimbursements and some claims were beginning to be denied for various reasons.

With the intervention of carriers and reinsurers, some vendors were limited on the amount of discretion they were able to use. The effect of this limitation was the beginning of the “hardening” market. Other vendors had their treaties terminated leaving many employer groups with no renewals. The supply of stop-loss vendors decreased quickly while the demand for their services remained the same.

During the hardened market, employer groups began to ask questions: how long is your treaty valid? How long have you been writing with your current carrier? What is claim turn-around time? These questions were never asked before 1992. Back then, stating that your carrier has an A.M. Best rating of A or higher was enough to ensure confidence. We know now that it requires much more than that to be a valid competitor in today’s market.

Educated consumers are now willing to spend a little more cash on premium when dealing with a vendor that successfully meets their requirements. The flight to quality has come a long way since 1992.

MBS Stop-Loss Partners

MedCost Benefit Services encompasses all the requirements an employer will be looking for in a stop-loss vendor. A feature that separates MBS from other TPAs is the ongoing quality review of our stop-loss partners' performance, which monitors:

• Financial ratings
• Underwriting philosophies
• Average claims turnaround time
• Number of consecutive years offering stop-loss
• Carrier’s / underwriter’s reputation in the market
• Policy exclusions and limitations – will the contract mirror the Summary Plan Description

Additional criteria for evaluating stop-loss insurance offered through an MGU vs. a direct carrier include:

• Does the MGU assume any financial risk, thereby assuring proper underwriting?
• Is risk reinsured with domestic carriers?
• Who has authority to make reinsurance settlement, the insurer or the MGU?
• Treaty renewal date and carrier persistency
• Are claims reimbursed from premium collected, a pool account maintained by the carrier, or directly by the carrier? This will impact reimbursement turnaround and also exhibit the carrier’s trust of the MGU’s claims underwriting and claims paying ability.

MGUs’ and carriers evaluate a TPA’s claims paying and managed care capabilities before issuing a policy. Conversely, MBS thoroughly evaluates the carrier’s and MGU’s underwriting philosophy, policy language, and claims paying capability. This assures that the stop-loss insurance recommended by MBS will meet our clients’ needs and requirements. MBS employs a professional underwriting staff to work with our clients and brokers in recommending quality carriers and contracts. We have partnered with quality MGUs and carriers who offer conservative and accurate underwriting, competitive fixed costs, policies that mirror or virtually mirror a Summary Plan Description, and timely claims reimbursement.

• AIG Medical Excess, underwriting for and wholly-owned by American International Group (AIG)
• Allianz Life Insurance Company (direct carrier)
• Boston Mutual, underwriting services provided by GreenWood International Insurance Services, Inc.
• Hartford (direct carrier)
• HCC Benefits, underwriting for HCC Life, both wholly-owned by HCC Holdings
• Highmark Life Insurance Company (direct carrier)
• National Benefit Resources, underwriting for and wholly-owned by United HealthCare. Also underwriting for Monumental Life
• Zurich North America (direct carrier)

While MBS is approved to work with many other MGUs and carriers, we have partnered with the above underwriters because they have met or exceeded our criteria for service and financial stability.

To request a quote, contact:

Michael Cornwell, Director of Marketing
mcornwell@medcost.com

Sharon Lambros, Chief Operating Officer
slambros@medcost.com

Or call (800) 217-5097

Or fax a quote request to (336) 760-3028