It’s December, and I’m currently in the car driving to celebrate at a holiday lunch with a great Holmes Murphy client. This particular client’s headquarters are a few hours outside of Dallas where I’m located, so we’ve got a bit of a drive ahead of us. The good news is that I’m not actually driving. I’m a passenger, and while my colleague drives, I’m also stealing, eh-hem, “borrowing” his WiFi hotspot. So, not only am I enjoying the chauffeured experience, I will be able to post this blog in real-time once complete. Dear technology, while sometimes frustrating, you definitely get a gold-star today!
Introductory ramble aside, the subject of my blog today has nothing to do with driving in cars or technology. However, it does relate to both the month of December and the particular client we’re going to visit. Let’s start by making the connection to the month of December. While the team at Holmes Murphy works with many different renewal dates, the most common on the Employee Benefits side of our business is January 1. Many employers follow the calendar year with their benefits, meaning that plans, deductibles, and budgets all reset on January 1.
With most open enrollments complete and implementations in the rearview mirror, December is a month for ID card distribution, final file feeds, and audits around any plan changes. It is also a month for reforecasting budgets and identifying any shift in assumptions with actual enrollment information. As budgets are reforecast and audits performed, we pay particularly close attention to stop loss.
While many reading this blog are painfully familiar with stop loss, I’ll give a quick explanation for those who are not. Stop loss is the re-insurance layer that sits above any given self-funded employers plan and offers budget protection against catastrophic claimants on an individual and plan basis. It allows employers to create a predictable budget without having to expose themselves to the unforeseeable and often untenable nature of high claimants. While volumes could be written about the impact of high-claimants on employers’ cost of benefits, the two things I’ll call out as being particularly significant in the current environment and a post ACA world are specialty medications and the removal of lifetime maximums. From a cost standpoint alone, these two items have taken traditionally large claimants and moved them to a different stratosphere entirely.
With that lengthy explanation out of the way, I’ll explain why an audit of stop loss is so important to our overall budgeting process. First, to bind the level of budget certainty that stop loss affords, self-funded employers pay for it. It is typically the single largest admin fee in the entire benefits budget, and with the inflationary nature of claims, can experience a sizable increase from one year to the next. For that reason, we must confirm pricing that was negotiated is actually being accurately billed. The second reason for the audit is to confirm the individual reimbursement level in comparison to on-going large claimants. While we analyze group size, risk tolerance, admin fee, historical, and on-going claims during our marketing process, on-going claims is a very important measure of future budget reforecasts.
This brings me to my second point: the client we’re going to visit. Without sharing important plan details, this plan will experience a multi-million-dollar bill for claims associated with one individual. The claim straddles two plan years and, without making an already boring blog even more so, I’ll tell you that having the correct contract in place is critical. The good news is that with the level of protection afforded to this client through our marketing and audit process, they can sleep well at night knowing their member is receiving the care they need and, ultimately, that their budget is protected against this significant spike in cost.
While all parts of the benefits and budgeting process are important, none carries with it more security and variability than stop loss. It is the ultimate “sleep at night” protection for your plan and your budget, and it’s extremely important to get it right. The experts at Holmes Murphy specialize in this level of review and are always here to help evaluate, secure, and implement the right coverage for employers so they can sleep well!
As the holidays approach rapidly, I hope everyone enjoys the season and has a chance to relax, reflect, and recharge. Be safe, call us with questions, and sleep well knowing we’ve got you!
Published on: 12.16.19