High Stakes Renewals: Proper Protection Against Catastrophe
Self-funded health plans continue to grow in popularity, and for good reason. Providing employers with greater flexibility, customization, and control over healthcare costs, self-funding is an attractive option. Unfortunately, self-funded plans can also come with a hefty side of risk—especially when it comes to large, unexpected claims. As medical costs continue to rise, treatment for complex conditions like cancer and the growing demand for specialty drugs can put a self-funded plan under significant strain. So how do you avoid that strain?
The Rise of Large Claims
First off, it’s helpful to understand where these growing risks are coming from. Recent reports from QBE America show that self-insured employers are undergoing a significant increase in the frequency of medical stop loss claims, a trend that’s been growing since 2023. Notably, that frequency shot up 39% from 2022 alone. Neoplasms, or tumors, are at the top of the list for large claims, accounting for 41% of claims in 2023. Cancer treatments are undeniably a necessity, but even a single cancer claim can result in hundreds of thousands of dollars in expenses, placing a heavy burden on employers’ budgets.
The risk of high claims isn’t just limited to cancer, either. Other conditions, like preterm births, circulatory diseases, and respiratory issues, can also contribute to high-cost claims, especially at higher stop loss deductibles. At this rate, employers may find themselves facing unexpected financial strain when multiple high-cost claims occur within a year.
The Role of Stop Loss Insurance & Strategic Risk Management
So again, how do employers avoid that strain? A simple answer—and a key strategy— is stop loss insurance. Providing a safety net for employers, stop loss coverage helps limit the financial impact of large claims by capping the amount an employer has to pay out-of-pocket for any single claim or group of claims within a year. This offers a layer of protection against catastrophic claims, while still allowing employers to maintain control over healthcare expenses.
Truly combatting these rising claims will take bit more than stop loss insurance alone, though. To ensure long-term stability, self-funded employers need to adopt comprehensive risk management strategies that go beyond stop loss insurance. A few ways strategic risk management can do just that is through:
- Data Analytics and Claim Forecasting
Using data to track medical trends, including the frequency and cost of claims, enables employers to better anticipate and prepare for large claims. Forecasting potential risks helps create a more accurate budget and allows for more effective plan design.
- Employee Education and Engagement
Educating employees about the benefits of preventive care, healthy lifestyle choices, and how to navigate the healthcare system can empower them to make more informed decisions, potentially reducing costly hospital visits and unnecessary treatments.
- Diversifying Risk
Large employers with diverse employee populations may benefit from risk pooling strategies to mitigate the financial burden of high-cost claims. By diversifying risk, employers can reduce the volatility caused by a few catastrophic claims.
The Advantage of Tailored Risk Management Services
When it comes to risk management, of course, there’s no one-size fits all. Every business is different, which means that the best protection for each might look different as well. At RMTS, we understand that, which is why we work to build a plan that not only brings down spending, but that is wholly unique to a business. Based on client needs, our expert team of underwriters, claims examiners, and account professionals take a proactive approach to risk management so employers can protect their workforce and their bottom line. Our goal is your protection—so self-funded health plans can continue to provide an advantage while allowing employers to remain fully and financially protected.
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