Contacts
Last year we published our inaugural Stop-Loss Survey, which allowed employers and their advisors to more accurately benchmark deductibles and premium levels based on peers of similar size and geographic area. As a result of the success of our 2017 Marsh & McLennan Agencies Stop-Loss Survey, we are excited to share with you the results of our 2018 survey.
As with all aspects of the insurance industry, the only constant is change. The stop-loss excess insurance market is no exception to the innovative cost containment strategies being implemented by payers and their customers, the employer. Expanded utilization of shared risk arrangements by third party administrators (TPAs) and providers, broad interest in reference-based pricing, growth of employer stop-loss captives and the advent of what is expected to be the first million-dollar prescription are just a few of the pressing topics our employers and consultants are implementing strategies around. Now more than ever, ensuring appropriate coverage levels and premium rates remain the focus for most employers.
To provide benchmarks for reinsurance coverage that are representative of local markets, 243 MMA clients were surveyed. These respondents cover nearly 200,000 employees and vary in size from nine to 20,000 covered employees, with an average of 825. Of the respondents, 99% purchased some level of specific (individual) stop-loss coverage, although at varying levels from $20,000 to $1,000,000 per individual. In addition, 135 (56%) of employers purchased some level of aggregate coverage with corridors ranging from 10% to25%.
Stop-Loss Excess Insurance Coverage Definitions
Specific Coverage: Insures the employer against a catastrophic loss incurred by one individual over a certain dollar limit (specific deductible) for a specified period of time.
Aggregate Coverage: Insures the employer against unusually high overall claim levels for the entire covered group for a specific period of time. Only claims below the specific stop-loss deductible on covered individuals are eligible.
Aggregate Specific: A separate deductible requiring fulfillment before any specific stop-loss coverage is applicable.
Laser: An individual or individuals that are carved out specific risks from stop-loss coverage, or assigned a higher specific stop-loss deductible on that risk.
Level-Funding: A self-funded mechanism in which an employer pays a fixed monthly premium which covers the cost of administration, the stop-loss excess reinsurance premiums and aggregate claims funding. At the close of the policy period, a settlement is performed with excess funding returned to the employer or in the case of inadequate funding, the employer will reimburse the carrier the difference.
Longevity of Self-Funding
According to the Mercer Annual Survey of Employers, 20% of employers are currently self-funding their benefits. For more and more employers, the time is right to consider self-funding their benefits. While 48% (up from 42% in 2017) of our employers have been self-funded for more than ten years, another 10% have begun self-funding in the past two years. With piqued interest in the self-insured mechanism, we expect the number of self-funded employers will continue to increase.
Contract Type
Specific and aggregate contracts are generally written in one of two ways—paid or incurred—depending on the needs of the employers. Paid contracts include contracts with coverage for claims incurred prior to the policy period, while incurred contracts include coverage for claims incurred during the policy period yet paid after the policy period. Nearly 86% of employers indicated that they had some form of paid coverage, with 55% indicating that they have a coverage period longer than 24/12 and 27% with 24/12 coverage.
Carrier Placement
Many third party administrators (TPAs) offer stop-loss coverage themselves or through a related company, which can provide efficiencies and ease for employers and even bundled premium savings. Fifty-three percent of responding employers purchased this coverage directly from the TPA or their related reinsurance company. The remaining 41% of employers placed coverage with outside stop-loss carriers, with the top carriers being Tokio Marine HCC, SunLife and Optum.
Average Specific (Individual) Deductible by Covered Employees
Individual stop-loss deductibles vary significantly even between like-sized employers. Employers who are more risk adverse, have cash flow needs or are new to self-funding generally tend to purchase lower deductibles than their counterparts with greater risk appetites. As an example, the most frequent deductible purchased by employers was $100,000, and was purchased by employers with between 80 and 1100 covered employees. Overall the average specific deductible was approximately $168,000.
Aggregating Specific
Many employers who prefer to keep their individual stop-loss deductible down but are willing to accept additional risk for potential savings are including aggregating specific deductibles with their current policies. With this type of deductible, the employer agrees to take the risk on a separate deductible that assumes the risk of the initial portion that the traditional specific stop-loss would cover. This can often provide dollar-for-dollar premium savings offset by the claim; risk is transferred to the employer and generally not applicable to the aggregate deductible. In 2018, 20% of employers purchased an aggregating specific deductible to be included in their coverage. The average aggregating specific deductible was $92,000, or 59% of the individual specific deductible for those with aggregating specific deductibles.
Lasered Claimants
To keep premium costs down and to ensure transfer of unknown risk, reinsurers may laser specific individual(s) at the initial policy inception or upon renewal. These lasers most often increase the specific deductible for the individual(s) but can exclude stop-loss coverage for the individual completely. In 2018, 11% of employers indicated that they had at least one individual lasered on their current policy. The average laser amount was $286,000 per individual, or 2.2 times the individual specific deductible for those with lasers.
Average Premium by Deductible
Average premiums by deductible, adjusted to a paid contract basis and for the impact of lasers and aggregating specific deductibles, are reported for respondents with stop-loss deductibles of $700,000 or less. Each marker indicates an individual employer’s specific deductible and applicable premium per covered employee per month. Employers reported initial increases of 13.4% but after benefit design changes and/or negotiations, final increases in specific premium were reported at 3.7% on average.
Average Premium by Deductible and Coverage Type
A simplified estimation of premium levels for common types of coverage are provided below at common deductible increments based on the trend line from the prior chart. In general, premiums for coverages 24/12 or longer are equivalent to paid premiums.
Aggregate Coverage
In addition to specific individual coverage, employers can purchase aggregate coverage, which is intended to provide reinsurance coverage in the event that overall claims experience is high in any given year. This coverage is generally purchased as an aggregate corridor above expected claims. Common increments for this coverage range from 110% to 125% with 85% of employers with aggregate coverage purchasing coverage with a 25% aggregate corridor. Of the 56% of employers purchasing aggregate coverage, the average specific deductible was $219,000. At levels higher than this, employers primarily chose not to purchase aggregate coverage, as they are likely more immune to the impact of annual fluctuations in claims and may have more historical experience and reserves built up.
To ensure appropriate aggregate coverage, it becomes increasingly important that employers ensure that expected claims are set appropriately when applying the aggregate corridor. In a case where expected claims are appropriately estimated, the likelihood of an aggregate claim in any given year is less than 5% with a 25% aggregate corridor. In the event that expected claims are set unnecessarily high, the likelihood of an aggregate claim decreases in some cases to nearly 0%, providing little to no coverage with unnecessary premium expense.
Aggregate Premium
Aggregate premiums are often quite low as compared to their specific counterparts; however they can vary significantly due to the very small likelihood of a claim in any given year. As a result, premium rating for this coverage is somewhat arbitrary and varies significantly from carrier to carrier. Of employers purchasing aggregate coverage, 27% had aggregate premiums that were included in their specific premiums. For those with separate rates for aggregate coverage, premiums varied significantly from $0.45 PEPM to $68.02 PEPM with an average of $8.67 PEPM.
Related Offerings
Employee Health & BenefitsYou May Also Be Interested In
- Event
01.27.2021
Webinar | The New Norm: Maintaining Productivity While Working From Home
- Event
02.09.2021
Webinar | 1+2=5? Understanding Your Benefits Cafeteria Plan
- Blog
01.21.2021
The 5 New Realities of 2021
- Event
01.20.2021
Webinar | New Developments in the Classification of Workers
- Blog
01.14.2021
Benefits News and Views
- Event
01.13.2021
Webinar | Leave of Absence and Return to Work Issues in the Era of COVID-19
- Blog
12.31.2020
WellConnected Resources
- Event
12.17.2020
Webinar | Year End Checklist 2020 and Future Forecast 2021
- Event
11.19.2020
Webinar | ACA Reporting Requirements 2020
- Event
11.12.2020
Webcast | 2020 Election Results: The Impact to Benefit Plans
- Blog
11.12.2020
Live Well Work Well Newsletters
- Event
10.21.2020
Webinar | Telemedicine: Permanent Solution or Temporary Fix
- Event
10.15.2020
Webinar | Health Savings Accounts 2020
- Blog
10.14.2020
INSIGHTS Newsletter
- Event
10.08.2020
Lunch & Learn: Take Charge Health
- Blog
09.24.2020
DOL Issues New FFCRA Leave Guidance
- Event
09.17.2020
Webinar | FMLA and Employee Benefits 2020
- Event
09.15.2020
Webcast | Benefit Administration: State of the Market
- Blog
08.21.2020
Open Enrollment Going Virtual
- Event
08.20.2020
Webinar | Compliance Considerations When Self-Insuring 2020
- Event
07.22.2020
WEBINAR | Next Chapter: Massachusetts Family Leave Act 2021
- Event
07.21.2020
Webcast | Senior Care - The New Normal
- Event
07.16.2020
Webinar | Annual Required Notices 2020
- Event
06.25.2020
Webinar | Paycheck Protection Program- Q & A Town Hall
- Event
06.17.2020
Webinar | Financial Wellbeing: Essential to the Health of Your Employees
- Blog
06.17.2020
National Safety Month: Check Your Safety Lens with a safety perception survey
- Blog
06.16.2020
Connecting with Your Five Employee Demographics
- Event
05.21.2020
Webinar | COBRA 2020
- Event
05.19.2020
Webinar | Legal and Compliance Return to the Workplace: Considerations for Employers
- Event
04.30.2020
Webcast | COVID-19: Managing the Impact- Weekly Update 4.30.20
- Blog
04.28.2020
Employee Mental Health: More Vulnerable Than Ever During the COVID-19 Crisis
- Blog
04.20.2020
Diversity and Inclusion and the Battle for Talent
- Event
04.16.2020
Webcast | COVID-19: Managing the Impact- Weekly Update 4.16.20
- Event
04.09.2020
Webcast | COVID-19: Managing the Impact- Weekly Update 4.9.20
- Event
04.02.2020
Webcast | Update on COVID-19: Navigating the Coronavirus and Managing the Impact
- Event
03.30.2020
WEBCAST | Employee Benefits & 401K Compliance During The Coronavirus Outbreak
- Event
03.24.2020
Webinar | Navigating the Coronavirus and Managing the Impact
- Event
03.12.2020
Webinar | The Power of Food
- Blog
02.06.2020
AD&D: What Employers and Employees Need to Know
- Event
01.23.2020
Seminar | Employment Law Landscape 2020
- Blog
01.16.2020
Employee Health & Benefits 2020 and Beyond
- Event
12.19.2019
Webinar | Year End Checklist and Future Forecast
- Blog
12.09.2019
Employee Benefits and Perks – Life Science Industry Raises The Bar
- Blog
12.05.2019
Financial Wellness
- Blog
12.03.2019
Building the Foundation for a Successful Implementation
- Event
11.21.2019
Webinar | ACA Reporting Requirements
- Blog
11.05.2019
Before the Turn of the Decade: Important Reminders Regarding Employee Benefits
- Event
10.17.2019
Webinar | Health Savings Accounts
- Blog
10.07.2019
4 Ways to Improve Open Enrollment
- Event
09.19.2019
Webinar | New HRA Options
- Event
09.12.2019
Webinar | New Developments with HRAs and 2020
- Blog
09.10.2019
5 Employee Wellness Initiatives That Work
- Event
08.15.2019
Webinar | Association Health Plans
- Blog
08.02.2019
Podcast | Choosing Your Broker
- Blog
08.01.2019
Wearable Health Care Technology: Fashion Fad or the Future?
- Event
07.18.2019
Webinar | Annual Required Notices 2019
- News
06.21.2019
MMA Midwest Named Second Largest Dayton-Area Employee Benefits Company
- Event
06.20.2019
Webinar | Mid-Year Compliance Review
- Blog
06.20.2019
A New Era of Employee-Centric Work Perks
- Event
05.29.2019
Seminar | Pharmacy - Everyone's talking about it, but what can I do?
- Event
05.16.2019
Webinar | Wellness Programs
- Blog
04.26.2019
Massachusetts Releases New Guidance and Employee Notice Template For Massachusetts Paid Family and Medical Leave (PFML)
- Event
04.25.2019
Webinar | Total Worker Health
- Event
04.18.2019
Webinar | HIPAA Privacy & Security Training
- Blog
04.11.2019
Approaching Healthcare Benefits Strategically
- Blog
04.11.2019
April is National Wellness Month
- Event
03.21.2019
Webinar | Federal Continuation Coverage
- Blog
03.15.2019
Five Ways Employee Benefits Are Advantageous for Smaller Businesses
- Event
02.21.2019
Webinar | FMLA & Employee Benefits
- Event
01.29.2019
Employment Law Landscape 2019
- Event
01.17.2019
Webinar: ACA Reporting Requirements
- Blog
01.16.2019
Understanding the Changes to Minnesota’s Whistleblower Act
- Blog
01.10.2019
2019: What to Expect in Employee Health & Benefits
- Event
12.20.2018
Webinar | 2018 Year in Review & Future Benefits Forecast
- Blog
12.20.2018
Making a List and Checking It Twice
- Event
12.14.2018
Webinar | Q4 2018 Health Care Reform Update
- Blog
12.12.2018
Can Telemedicine Make Health Care Benefits Healthier?
- Blog
12.03.2018
Employment Law Update: Minimum Wage Keeps Climbing
- News
11.29.2018
Engaging Your Employees Requires Your Own Engagement
- Blog
11.29.2018
IRS Increase Health FSA Contribution Limit for 2019 & Adjusts Other Benefit Limits
- Event
11.20.2018
Webinar | Back to Basics: Consumer-Based Plans 101
- Blog
11.08.2018
Four Steps Employers Can Take to Help Alleviate the Opioid Crisis
- Blog
11.02.2018
Build a Positive Workplace Culture That Promotes Honest Communication
- Blog
11.02.2018
Compliance Update: HRAs Poised For a Facelift
- Blog
10.25.2018
The Impact of Stress in the Workplace
- Event
10.18.2018
Webinar | Annual Required Notices
- Event
10.12.2018
Webinar | Q3 2018 Health Care Reform Update
- Blog
10.09.2018
IRS Releases Final 2018 ACA Reporting Forms and Instructions
- Blog
10.05.2018
What are the Government's Plans to Solve the Opioid Problem?
- Event
09.18.2018
The Opioid Epidemic: A Public Health Crisis
- Blog
09.17.2018
Is Marijuana the Answer to the Opioid Addiction Problem?
- Blog
09.12.2018
Compliance Update: Medical Loss Ratio Rebates Under the Affordable Care Act
- Event
09.06.2018
Webinar | Association Health Plans
- Blog
09.06.2018
Rule #1 For Effective Open Enrollment: Start Early
- Blog
08.21.2018
Tobacco: Still Affecting Businesses’ Financial Health
- Blog
08.17.2018
Open Enrollment: Ways to Control Costs
- Event
08.16.2018
Webinar | Surviving a DOL Audit
- Blog
08.07.2018
Open Enrollment: The Benefits of Smarter Communications
- Blog
08.06.2018
The Opioid Crisis: Using Alternative Approaches to Manage Pain
- Blog
07.25.2018
Is An EAP Worth The Investment?
- Blog
06.29.2018
The DOL's New Association Health Plan Rules and What They Actually Mean
- Event
06.21.2018
Webinar | 2018 Mid-Year Compliance Update
- Blog
05.30.2018
The Opioid Crisis: A Serious Societal and Business Issue
- Blog
12.27.2017
Employee Benefits in 2018
- Blog
10.13.2017
Telemedicine and HSAs
- Blog
10.06.2017
Data Breach Risks During Annual Enrollment
- Blog
09.26.2017
Annual Enrollment
- Event
03.14.2017
The Future of Health Care & Employee Benefits