Nov 13, 2013 - from a third-party carrier. ⢠Available stop loss products: â Individual (or specific) stop loss. - C
STOP LOSS ANALYSIS CITY OF OVERLAND PARK November 13, 2013
Today’s Agenda • Background • Current Coverage & Claims Experience • Initial Renewal & Marketing Results • Recommendations and Next Steps
MERCER
November 13, 2013
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BACKGROUND
Stop Loss Analysis Background • Stop loss insurance is over a $5 billion market in the U.S. • Self-insured clients who want to mitigate risks due to large or unanticipated claims purchase stop loss coverage through their claims administrator or from a third-party carrier • Available stop loss products: – Individual (or specific) stop loss - Coverage per member in excess of a set threshold - Most prevalent type of stop loss coverage – Aggregate stop loss - Coverage for total claim spend above a corridor (i.e., 125% above expected) - More prevalent with smaller employers
MERCER
November 13, 2013
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Individual Stop-Loss Coverage (ISL) • ISL coverage protects an employer from catastrophic large claims on an individual (member) basis over a pre-determined threshold. • The employer elects coverage at a specific level (e.g. $400,000). Once a claim for any covered member reaches that limit, all eligible claims paid over that level during the policy period would be reimbursed under the stop-loss policy. $700,000 $600,000
$600,000
$500,000
Specific Deductible
$500,000
$400,000 $300,000 $250,000
$200,000 $100,000
$125,000
$100,000
$0
Claimant A
Claimant B
Claimant C
Claimant D
Claimant E
• Since Claimants C and E exceeded the specific deductible of $400,000, the insurer will pay for the claims above $400,000 • The employer pays a set monthly insured premium for this protection MERCER
November 13, 2013
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Individual Stop-Loss Coverage (ISL) Aggregating Specific Deductible Feature Example: $200,000 ISL with $100,000 aggregating specific deductible
An aggregating specific deductible adds another layer to the stop loss, as illustrated:
$100,000 aggregating specific deductible $200,000 ISL
$100,000
$40,000
$50,000
$200,000
$200,000
$200,000
$200,000
Claim 1
Claim 2
Claim 3
Claim 4
$210,000
$240,000
$250,000
$300,000
$10,000
$100,000 reimbursement
Number of employees
ISL Level
Premium
1000
$200,000
$56 PEPM / $672,000
1000*
$200,000
$48 PEPM / $572,000
*Aggregate specific policy
• You should see a dollar for dollar reduction in premium equal to the amount of the aggregating specific corridor MERCER
November 13, 2013
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Aggregate Stop Loss • ASL coverage protects an employer from abnormally high claims experience for the entire covered population • The employer and carrier agree on an expected PEPM claims cost for the policy period. If the annual PEPM claims cost exceeds that projection by more than the aggregate coverage corridor (e.g. 125%) then the stop-loss carrier would reimburse the employer for all claims over that threshold • Claims reimbursable under ISL coverage are excluded from coverage and the PEPM calculation for ASL coverage • Larger employers do not generally carry ASL coverage as it is unusual to see the PEPM claims cost exceed the aggregate corridor on a large population $4,000 $3,500
$3,400
Attachment Point
$3,100
(In Thousands)
$3,000
$2,800 $2,600
$2,500 $2,100
$2,000
$1,800 $1,400
$1,500 $1,150 $850
$1,000 $500 $350
$500 $100
$0
Jan
Feb
Mar
Apr
May Jun
Jul
Aug Sep
Oct
Nov
Dec
• If cumulative claims exceed the aggregate attachment point of $3,300,000, the insurer will pay for the claims that exceeded $3,300,000 MERCER
November 13, 2013
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Stop Loss Analysis Benchmark Data • Based on the 2012 Mercer Survey, percentage of employers with a self-funded PPO that carry stop loss: Covered Employees
500-999
1,000-4,999
5,000-9,999
10,000-19,999
20,000+
With Stop Loss
95%
90%
74%
60%
33%
Without Stop Loss
5%
10%
26%
40%
67%
• Of those carrying stop loss, percentage of employers with specific coverage, aggregate coverage or both: Covered Employees
500-999
1,000-4,999
5,000-9,999
10,000-19,999
20,000+
Specific Coverage Only
28%
40%
53%
60%
64%
Aggregate Coverage Only
16%
13%
9%
10%
11%
Both Specific and Aggregate Coverage
56%
47%
38%
30%
25%
Covered Employees
500-999
1,000-4,999
5,000-9,999
10,000-19,999
20,000+
Specific Stop Loss Deductible
$150,000
$225,000
$300,000
$400,000
$400,000
• Median specific stop loss deductible
MERCER
November 13, 2013
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Stop Loss Analysis Contract Basis • Stop loss premium can vary significantly based on the coverage basis selected • Mature contracts are recommended (e.g. Paid, 24/12, 12/24) and provide the most comprehensive coverage – Contracts with only 3 or 6 months of run-in or run-out coverage creates gaps which can lead to denied claims
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November 13, 2013
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Stop Loss Analysis Common Terms
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November 13, 2013
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CURRENT COVERAGE AND CLAIMS EXPERIENCE
Stop Loss Analysis Current Coverage • The City of Overland Park has individual stop loss coverage with UHC • Coverage has been in place since 1/1/2001 • The current contract, with provisions below, are renewing as of 1/1/2014 Specific Stop Loss Premium
Composite
Enrollment
Rate
812
$45.98
Total Annual
$448,029
Stop Loss Deductible
$175,000
Aggregating Specific Deductible
$0
Contract Basis
Paid
Policy Period Maximum
Unlimited
Retirees Covered?
Pre-65 Only
Rx Covered?
Yes
• Paid Contract from 2001 is 168/12 • There are no lasers
• Retirees are covered if they retired prior to 1/1/2011 MERCER
November 13, 2013
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Historical Large Claim Information • 2013 Large Claims YTD – $255,645 – Other diagnoses – $168,549 – Malignant neoplasm descending colon – $157,783 – Malignant carcinoid tumor of bronchus and lung – $119,518 – Pulmonary disease due to other mycobacterium – $109,594 – Multiple Myeloma without mention achieved remission – $95,264 – Threatened premature labor antepartum • $197,147 in total reimbursements in 2012
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November 13, 2013
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RENEWAL AND MARKETING RESULTS
Stop Loss Analysis Placement Strategy • The renewal was Marketed to several carriers • Results • UHC – Inforce carrier provided a quote • HCC – Quoted • Symetra – Declined • Sunlife – Did not provide quote, requested additional information outside of the RFP • Hartford – Declined does not offer stop loss coverage • AIG – Declined • HM Life – No quote received by deadline • ING – No quote received by deadline
MERCER
November 13, 2013
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Renewal & Marketing Results
Current
Renewal
UHC Specific Coverage Contract Basis Rx Included Commissions Included Retirees Covered* Policy Period Maximum TLO Lasers Deductible Aggregating Specific Deductible Premium Rates (PEPM) Composite Covered Employees Total Total Annual Premium Change from Current ($) Change from Current (%) Change from Renewal Change from Renewal - $ Change from Renewal - %
Alternative Option 1 Alternative Option 2 UHC
Paid Yes 0% Pre-65 Only Unlimited Yes No $175,000 $0
Paid Yes 0% Pre-65 Only Unlimited Yes No $175,000 $0
Paid Yes 0% Pre-65 Only Unlimited Yes No $200,000 $0
Paid Yes 0% Pre-65 Only Unlimited Yes No $225,000 $0
$45.98
$49.65
$45.45
$39.38
812 $448,029 N/A N/A
812 $483,790 $35,760 8.0%
812 $442,865 ($5,164) -1.2%
812 $383,719 ($64,310) -14.4%
N/A N/A
N/A N/A
($40,925) -8.5%
($100,071) -20.7%
* Retirees covered if retired before 1/1/2011 * TLO option is already included in the UHC plan at no additional cost.
MERCER
November 13, 2013
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Renewal & Marketing Results Current
Renewal
Stop Loss Marketing Results Specific Deductible Option 1
Specific Deductible Option 2
Specific Deductible Option 3
$175,000
$200,000
$225,000
HCC
HCC
HCC
UHC Specific Coverage Contract Basis Rx Included Commissions Included Retirees Covered Policy Period Maximum TLO Lasers Deductible Premium Rates Single Family Composite Covered Employees Single Family Total Annual Premiums TLO Option 10% increase in premiums Stop-Loss Interface Fee Total Annual Premiums with TLO option Change from Current Change from Current - $ Change from Current - % Change from Renewal Change from Renewal - $ Change from Renewal - %
Paid Yes 0% Pre-65 Only Unlimited Yes No $175,000
Paid Yes 0% Pre-65 Only Unlimited Yes No $175,000
24/12 Yes 0% Yes Unlimited No No $175,000
24/12 Yes 0% Yes Unlimited No No $200,000
24/12 Yes 0% Yes Unlimited No No $225,000
n/a n/a $45.98
n/a n/a $49.65
$20.12 $60.15 $46.05
$17.33 $52.69 $40.23
$15.01 $46.75 $35.57
286 526 812
286 526 812
286 526 812
286 526 812
286 526 812
$448,029
$483,790
$448,711
$392,001
$346,594
Included
Included
$44,871
$39,200
$34,659
N/A
N/A
$9,744
$9,744
$9,744
$448,029
$483,790
$503,326
$440,945
$390,997
N/A N/A
$35,760 8.0%
$55,297 12.3%
($7,084) -1.6%
($57,032) -12.7%
N/A N/A
N/A N/A
$19,537 4.0%
($42,844) -8.9%
($92,792) -19.2%
Notes: - All proposals are subject to final disclosure. Refer to proposals for a complete list of contingencies. - Costs do not include potential charges from the TPA to provide stop loss claim reporting to an outside stop loss carrier. - $1.00 PEPM external stop loss reporting fee if external vendor is chosen. - Retirees covered if retired before 1/1/2011
MERCER
November 13, 2013
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RECOMMENDATIONS AND NEXT STEPS
Stop Loss Analysis Recommendations and Next Steps • UHC – Renewal premiums at the current level of $175,000 are $483,790. – All stop loss options include a rider for the TLO Terminal Liability Options which was added as a rider in 2004. Removing this rider does not change the premiums. – This provision extends the stop-loss protection for individual claims that are incurred in the plan year but paid for up to three months after the contract terminates – The specific deductible from the prior year continues to accumulate after the termination of the plan providing additional protection for the City – If the plan renews this provision is not in effect and the stop loss deductible will start over as of January 1, 2014 for any claims incurred but not paid in 2013 • HCC – Annual premiums at the current ISL level which include the interface fee and the TLO would be $503,326 – The annual cost for an external stop loss vendor is $9,744 and 10% premium increase for the TLO provision – UHC downloads claim data to HCC once a month and HCC pays based on these reports. City staff will need to complete and provide additional paperwork to HCC Life for large claimants that hit the specific deductible in order to receive reimbursement – Without the TLO the quoted stop loss contract does provide run in coverage but this would go towards a new specific deductible and not under the 2013 specific deductible
MERCER
November 13, 2013
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Services provided by Mercer Health & Benefits LLC. California Insurance License 0E75483
