INSIGHTS

Traditional Stop-Loss vs. An Employer Stop-Loss Consortium: Are Mid-Sized Employers Relying on a Risky Policy?

Employers don’t tolerate costly surprises, and brokers pay the price. If one high-dollar claim could put your renewal at risk, find a safer stop-loss solution to protect your business and your clients.

October 29, 2024

The unpredictable nature of high-dollar claims can devastate a group’s financial stability in a single year.

Mid-size employers could run smoothly for years without major claims, but then one large claim can wipe out any previous savings, causing a massive increase in healthcare costs.

With the frequency of million-dollar claims rising by 50% over the last four years, traditional stop-loss is becoming a risky bet for mid-size groups.

Short-term stop-loss policies are underwritten annually. This means that after a bad claims year, insurers can issue lasers, leaving the employer exposed to higher max risk and rising premiums.

Is there a better way to protect against unpredictable, high-dollar claims and gain more control?

Let’s explore why traditional stop-loss methods fail and how an alternative offers the long-term stability mid-size employers seek.

Traditional Stop-Loss: A Bumpy Ride for Employers

Employers often rely on traditional stop-loss policies to manage the financial risks in self-funded health plans.

In these plans, they assume the responsibility of covering health claims out-of-pocket.

To safeguard against unpredictable, high-cost claims, employers purchase stop-loss policies.

This coverage kicks in when claims exceed a predetermined threshold, known as the specific deductible.

While it offers protection against catastrophic claims, it comes with 4 main challenges:

1. Volatility: Small to mid-sized groups face fluctuations in claims, leading to unpredictable costs and gaps in coverage due to the length of high-dollar claimants.

2. Gaps in Coverage: Major conditions like cancer and chronic diseases result in claims that exceed the renewal period, leaving employers with coverage gaps.

3. Lasers: These are specific, higher deductibles applied to high-risk individuals at renewal, which leads to risks employers can’t bear. In today’s market, where million-dollar claims have been up 50% over the four years, this becomes a risky situation for employers.

4. Limited Control: Employers have limited control over claims management inside the pool that they’re underwritten with at renewal and often face annual premium increases without clear insights into cost drivers.

Traditional stop-loss works better for larger groups that can handle fluctuations and absorb higher deductibles but it’s a bumpy ride for mid-size employers because of the unpredictability and volatility in claims.

One of the key challenges is that mid-size groups aren’t large enough to be “credible” underwriters.

This means they don’t have enough data to predict claims accurately, making them very unpredictable.

As a result, employers in this size range experience wild fluctuations in their healthcare costs.

But what if there’s a more stable and predictable approach?

Employer Stop-Loss Consortium Explained

A stop-loss consortium is a specialized risk management model that provides financial stability and predictability for mid-sized businesses that self-fund their health plans.

It takes a collaborative approach, pooling together multiple employers to share risk and manage costs.

3 ways consortiums differ from traditional stop-loss insurance:

1. Risk Pooling: By sharing the risk among multiple employers, the consortium model helps to stabilize premiums and reduce year-to-year volatility from high claimants and unpredictable claims.

2. Enhanced Data Transparency: Employers gain better access to claims data, allowing for more informed decision-making and tailored plan designs.

3. Shared Rewards: Any savings achieved through effective claims management are typically shared among the consortium members with lower pooled renewals, creating an incentive for all to manage costs responsibly.

Employer Stop-loss consortiums offer a collaborative solution to managing healthcare costs, but not all consortiums are created equal.

Let’s take a look at the Virtue Health Stop-Loss Consortium.

The Virtue Health Stop-Loss Consortium

The Virtue Health Consortium provides a next-level stop-loss solution, offering employers across the country a way to control costs and ensure stability.

Here are the top 7 reasons why employers choose us:

1. Predictable Premiums: Our consortium model pools risk among like-minded employers, leading to more stable and predictable premiums year after year. Reducing the stress of unexpected rate hikes.

2. Exclusive Private Pool: Unlike public insurance pools, our private pool accepts only employers who meet mandatory cost-containment requirements. This ensures that every participant is dedicated to controlling healthcare expenses. Learn more about private insurance pools vs public options.

3. Smarter Underwriting: With AI-driven underwriting, we analyze claims data with 80% accuracy, delivering more accurate risk assessments and protection from high-dollar claims, which helps employers secure their budgets.

4. No New Lasers: Unlike traditional stop-loss, we don’t impose new lasers.

5. Long-Term Solutions: Our multi-year program allows employers to maintain their existing risk management framework and cost-containment strategies over an extended period, rather than being subjected to new underwriting rules every 12 months.

6. Cost-Containment Requirements: Our program enforces cost-containment measures, partnering with independent TPAs and fiduciary PBMs to ensure claims are managed efficiently and eliminating abuse that can drive up costs.

7. No Collateral Required: With us, there are no collateral demands or surprise cash calls.

The Virtue Health Consortium elevates the stop-loss consortium model to a new level, leveraging collective purchasing power to mitigate these challenges.

For the past 7 years, Virtue Health has been the choice for mid-sized employers seeking long-term stability without the burden of traditional models.

Ready for the Next Step?

If you want to provide stable, long-term solutions for your clients, reach out to us at Virtue Health.

We’ve helped brokers like you avoid the unpredictability and financial strain caused by last-minute, high-cost claims under traditional stop-loss insurance models.