Manage health plan costs: How an independent direct medical stop-loss insurer can help
Employers should carefully consider who they partner with for design, administration and stop-loss coverage to reimburse catastrophic claims.
The rising cost of providing health insurance continues to be a significant expense for employers. To better mitigate risks, manage costs and improve health outcomes, an increasing number of employers are choosing to self-fund their employee benefit health plans. The partners they choose for design, administration and stop-loss coverage to reimburse catastrophic claims are important decisions.
Many companies contract with a national medical insurer to supply administrative services only (ASO), provider network access, and medical stop-loss coverage, which protects the self-funded employer health plan against catastrophic claims. This is referred to as a “bundled” arrangement for the stop-loss coverage.
Related: Debunking the most common myths around benefits stop-loss captives
This bundled arrangement, however, forgoes the benefit of having a second review of claims by an independent medical stop-loss carrier. Typically, large ASO providers must operate at tremendous speed and scale, and the bundled medical stop-loss coverage is a single component of a package offering. When the ASO and stop-loss carrier are separate entities, the independent stop-loss carrier can provide a dedicated “second set of eyes” to perform due diligence reviews and offer cost containment insights an ASO may not have the capacity to deliver.
With an “unbundled” ASO and separate stop-loss insurance arrangement, the independent carrier can often identify opportunities to collaborate with stakeholders and improve plan performance. Some of the most common examples of areas where such experts can deliver savings and improve plan performance include:
Benefits paid on individuals no longer eligible under the plan due to termination. For instance, our Claims team identified a case where the ASO had mistakenly allowed for the continuation of benefits for an individual that no longer met the plan’s eligibility requirements for the previous five months. Once QBE notified the stop loss policyholder’s ASO, the error was corrected to ensure no additional benefit payments were made after the termination date. More than $100,000 in policyholder funds were recovered from the oversight of benefits payments made in error.
Duplicate and erroneous payments due to corrected bills and network repricing discrepancies. For example, our specialized Claims and Medical Risk Management teams identified a claim where our self-insured policyholder overpaid more than $800,000 in drug expenses. We informed the client and ASO of the issue, and they took steps to recoup the money.
Benefits not properly coordinated with another carrier such as Medicare or another commercial insurance carrier. In one case, our specialized Claims team identified a claim where our self-insured policyholder overpaid more than $500,000 in medical expenses. Medicare should have been paying as the primary insurer. We informed the policyholder and broker of the issue and the amount due back to their self-funded health plan. The plan sponsor then moved to recover the funds.
Once identified, claim payment oversights are surfaced to plan sponsors for consideration when reviewing the overall management of their health plan. If the stop loss policy remains bundled with the ASO provider, these types of incidents may go unnoticed and get passed through to the self-funded health plan’s expenses. Absent checks and balances, erroneous claims may be reimbursed, impacting the employer’s loss ratio, which ultimately leads to a larger premium increase at the policy renewal.
Given the benefit of a separate carrier review, why do many employers choose a bundled structure? Two factors have historically influenced the decision, but industry-leading independent medical stop-loss providers have enhanced their offering to address these factors. First, a bundled solution eases administration as gaps in coverage are minimized as both the ASO plan document and stop-loss policy align. The plan document outlines everything from eligibility under the plan, the schedule of benefits and how claims determinations will be made.
As a result of this alignment, once the individual deductible is exceeded, the ASO issues a reimbursement.
To resolve this concern, many independent stop-loss carriers offer a plan mirroring endorsement to their policy. The endorsement removes any underlying stop-loss policy provisions that would conflict with the health plan provisions as stated in the employer’s plan document. Medical necessity definitions, experimental & investigational treatments and criminal act type exclusions are coverage areas that can be resolved via this endorsement to the unbundled stop-loss policy. The independent stop-loss carriers can also provide contractual enhancements typically not available to employers with bundled arrangements, such as benefits to maintain year-over-year specific deductibles or premium refund endorsements.
The second historical reason for a bundled solution is the speed of medical stop-loss claim reimbursement. Most ASOs, will not file a stop-loss claim on behalf of the employer with an independent stop-loss carrier. Instead, the ASO provides monthly reporting only. A few of the top independent stop-loss carriers have not only acknowledged the obstacle but developed a value-added solution via advance payment.
With advance payment, the independent carrier initiates claim reimbursement requests on behalf of the policyholder when a claim exceeds the group’s specific deductible. The carrier then advances and issues the reimbursement to the policyholder, subject to audit later. Additionally, reimbursement can be made via ACH payment, another value-added service by select independent carriers. ACH payment has been especially helpful during the COVID-19 pandemic, when mail delivery has been delayed and employers’ HR or benefit contacts have not been in the office to accept the checks. With advance payment and ACH, funds can reach the policyholder’s account within hours of the claim reimbursement determination.
Each employer’s needs are unique, and all factors should be considered when choosing a stop-loss provider. But with rising costs resulting from new treatments and drug therapies, the benefit of having a dedicated second set of eyes to perform due diligence reviews and suggest cost containment strategies makes a strong case for keeping the ASO provider and medical stop-loss insurer separate.
Jesse Roderick is vice president of accident & health claims at QBE North America, and Ed Wadhams is vice president of accident & health national partnerships.
This article is for general informational purposes only, and should not be construed as legal or professional advice. The anecdotes contained herein are descriptive only, and should not be perceived as a representation regarding the value, handling or resolution of any claim, or as a representation that any claim or loss is covered under any such insurance policy. Actual coverage is subject to the language of the policies as issued. The coverage, value, handling or resolution of a claim or loss depends on the specific facts and circumstances of the relevant claim or loss, as well as the applicable insurance policy provisions.
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