Four Employer Goals
We believe the current marketplace and traditional spreadsheeting does not serve employers well. Insurers continue to set all the rules, decide who to insure and at what price, and avoid risk when employers most need insurance protection. There is a severe imbalance in power between buyer and seller in today’s stop loss markets.
There are four goals important to an employer:
- Low Cost
- Good Risk Management
- Insurance When Needed
Goal number 1 (low cost) is typically obtained only by giving up the other three goals. Low cost plans on a spreadsheet will not provide risk management, will not be stable, and will not provide insurance when needed.
The goal of insurance is to have affordable insurance when needed. Typical stop loss consists of heavily underwritten policies that are designed to provide insurance when employers don’t need it and will treat customers poorly when they do.
A failed event with self-funding (a coverage gap, a denied claim, a laser, a catastrophic year) can strip away all the gains from self-funding that have accrued over many years. Or, can strip away any perceived savings from the past several years of spreadsheeting. Employers need to consider, “how will I be treated under bad conditions as well as under good conditions?”
A self-funded employer who purchases alone in the market and develops a large on-going claim within the group will suddenly become uninsurable or face very severe price shocks. It’s better to seek long-term stability in a risk pool that truly spreads the risk.
Better Stop Loss
Contribution Health has two business models that build stop loss programs to achieve all four goals.
A consortium is an employer-centric “informal captive” with lower expense margins, more flexibility, and greater control over the placement of stop loss. Key advantages are:
- Increased purchasing power
- Ability to shop among carriers (captives are usually controlled or locked into the carrier)
- Quick to market, no expensive feasibility studies
- Freedom for each employer to choose plan design and administrator and network
Home Court – the nation’s first electronic stop loss exchange
Home Court establishes an employer-centric closed marketplace where carefully selected insurers are invited to participant in bidding on employer stop loss. In return for allowing access to employer purchasers to the Home Court marketplace, insurers are asked to change the rules and become cooperative partners in helping employers achieve low cost and other goals of self-funding. Thus, the exchange brings buyers and sellers together in a unique marketplace designed for better outcomes and sustainable stop loss.
The exchange marketplace is built on a platform of specially designed online software unlike anything else in the market. The software allows employers to build their own proposals, suggest the prices they want to pay, and perform other useful modeling to help them with the purchase of stop loss. Ultimately, the electronic platform has the potential to integrate closely with bidding insurers and bring further efficiencies to the process.
The modeling software (METRO) places a complete rating and actuarial system into the hands of brokers allowing better service and competitive advantage over other brokers:
- Actuarial value calculations
- Stop loss proposal illustrations and options
- Stop loss benchmarking and illustrations for fully insured employers
- COBRA modeling for multiple plans
- Plan design modeling
- Long term forecasting showing the impact of plan changes
- Online benefit statements and other tools.
By building powerful employer-centric programs, favorable underwriting terms can be negotiated, long term stability can be achieved, and the trajectory of employer costs can be changed.
Risk management and stability are designed into the process by taking back control. Carriers who participate in consortiums or Home Court allow the actuaries representing the employer to determine the opening bid price and the renewals. A successful employer program will compel carriers to comply with demands of the buyers as market share grows. Changing the stop loss marketplace and taking back control is a strategy, not a product. It requires a commitment by employers to act together in their own good to restore the balance of power between buyer and seller. It requires employers to articulate the goals of the buyer and push the sellers to comply. A powerful consortium of employers or a marketplace such as Home Court can do this.
Contribution Health specializes in partnering with brokers to build unique programs designed and controlled by the broker, not the insurance companies, for the benefit of employer customers.