This is the first in a series of articles highlighting large claims and other exposures as well as a variety of strategies you can employ to minimize the risk to you, your organization and your plan.
Is your plan appropriately structured to protect against the increasing number and size of large claimants?
Depending on the size of your plan, key decisions can make or break the plan’s long-term financial health. Whether you are a small group considering the transition from fully insured to self-funded, a middle-market group determining the appropriate stop-loss terms, or a large group considering (or already) fully self-funded with no stop loss, making the right decisions is imperative. We’ll discuss each of these in more detail in future articles.
Regardless of plan funding, large claim activity is an unavoidable fact. According to the 2019 Aegis Risk Medical Stop-Loss Premium Survey:
- 24% of responding employers had a claimant larger than $500,000. This number was on 17.5% just 5 years ago.
- 9% had a claimant larger than $1.5 Million, nearly double the 5% it was 5 years ago.
The emergence of biologics and gene specific medications will serve to drive these increases further as we move forward, as evidenced by Zolgensma (treats Spinal Muscular Atrophy) at an estimated $2.1 million and Luxturna (gene therapy for a retinal disease) at an estimated $850,000. The pipeline of future treatments, both medically and pharmaceutically, will present challenges to plan sponsors.
There is a myriad of strategies you can employe to help protect your plan. A small sampling includes stop loss contract provisions, marketing your stop loss, managing deductible levels and captive arrangements. Most importantly, you must use your plan data to drive your decision making and strategy moving forward.
There is no one-size-fits-all solution to appropriately structuring your plan. To be successful, you must utilize all the data available to you and be adequately armed with the knowledge and information necessary for such decisions. As a trustee or plan manager you should lean heavily on trusted partners – consultant, actuary, carrier partners – for this information. Strong partners will help you succeed and help you protect the plan and yourself as a fiduciary.
COMING SOON: In the second article of this series will focus on whether to fully insure or self-fund your plan.