Ripple Effect: The ACA and Stop-Loss Insurance

The passage of the Affordable Care Act (ACA) five years ago has had a tangible effect on the stop-loss premiums paid by self-funded health plans. The ACA’s elimination of annual and lifetime dollar limits and pre-existing conditions and the provision authorizing coverage of clinical trials have exposed the stop-loss carriers to greater risk. In response, employers have seen, on average, about a 15% increase in stop-loss premiums over the last three years.

The ACA’s expanded coverage requirements are not the only market force affecting stop-loss premiums. We’re seeing more interest in self-funding from smaller employers seeking to avoid some of the more onerous ACA provisions required of fully-insured plans. This market expansion is costly because smaller groups tend to accept less risk. In the long-term, the market may contract to pre-ACA levels if more states join those already regulating minimum individual deductibles and aggregate limits. This regulation is being driven by the states’ interest in discouraging younger and healthier groups from self-insuring while older and less healthy groups remain in insured plans — on or off the exchanges.

Finally, there’s been an increase in the severity of catastrophic claims largely due to specialty pharmacy, transplants, cancer treatments, neonatal care, and advances in medical technology. Employers with catastrophic claims obviously rely on stop-loss insurance to help manage those costs, and with stop-loss carriers now bearing more risk in the absence of cost caps, the pressure on premiums is expected to continue for the long-term. We are seeing claims in excess of $10 million in the marketplace. Those costs will largely be borne by the stop-loss insurer.

Although these are three formidable market forces, employers aren’t without options. Benefits professionals should:

  • Explore or enhance health care strategies that aggressively manage your enrollees’ health.
  • Help individuals with complex conditions to better negotiate the health care system and ensure they are getting cost-effective, quality care.

Ideally, you’ll be able to use the resulting decreases in your plan’s claims experience to negotiate better rates with your stop-loss carrier.

Ken Jeffries
by Ken Jeffries

National Stop Loss Leader, Mercer

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