The Market

In the late 1980’s there were approximately 45 sources from which to obtain health care excess loss reinsurance. That increased to nearly 200 in the early 1990’s. Entering the 21^st century, marketplace capacity has diminished and is at its lowest point in 30 years. The large number of risk bearers entering and exiting the marketplace makes it difficult for plan sponsors to stay current. Contemporary plans require complex managed care and administrative protocols. Creative plan design must be matched to the proper reinsurance carrier in order to maximize the effectiveness of excess loss contracts. Knowledge and access to market research is vital in obtaining relevant proposals.

For information, contact:  John Frigon, Employee Benefits Specialist

Stop loss coverage or reinsurance for employer health insurance is an attractive alternative to the fully insured market  for cost conscious employers.   Self-funding is an alternative that enables employers to control rising healthcare costs.   Most self-funded employers want flexibility in making key decisions on benefits, administration and funding, yet need to limit their liability.

Stop loss coverage or reinsurance is designed to protect self-funded employers against catastrophic losses.  This excess risk protection is available in several forms.

Specific excess coverage is available to protect the employer from unpredictable, catastrophic losses on any one individual.  The underwriting approach may rely on the employer's benefit plan, large claim experience and the group's characteristics.  

The employer is responsible for a specific dollar amount or retention for each covered individual.  The reinsurance carrier would reimburse the employer up to the policy limit once the claim exceeds the retention.

Aggregate excess coverage is intended to provide claim protection to to the employer for its entire group.  Employers self-funding their medical benefit programs are responsible for payment of the total expected claims plus an additional corridor amount.  This amount is general expressed as a percentage of the expected claims.  This coverage may be based on frequency rather than severity.   The underwriting approach relies heavily on past experience of the group.