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Self-Funded Playbook
Helping you advise your clients on decisions related to self-funding and stop-loss.
Whether your clients are already self-funded or are interested becoming self-funded, it's important for you to help them to consider all of their options, so they can make the best decision for their business. This experience will walk you through the key decision points when it comes to self-funding.
To get started, click on one of the sections below:
BROKER GUIDANCE
To access our full broker-specific self-funded playbook, click here
Key Decision #3
Key Decision #2
Key Decision #1
Action Plan
Funding Arrangements
Self-funding action plan — help advise your clients
Work with your clients to understand and meet their needs so that you can help them develop a self-funding action plan.
Once your client has decided to become self-funded, the next tabs (claims administration, stop-loss insurance, and cost-containment), have elements to consider when creating a self-funded plan.
Evaluate if self-funding makes sense for the particular business
Determine the business’s benefits strategy and financial goals. Understanding their risk tolerance and cash-flow needs will help the employer decide if it should be fully insured, self-funded with stop-loss insurance, or self-funded without stop-loss insurance. Provide counsel to your employer clients alongside their chosen plan administrator.
ACTION PLAN
STEPS
Finalize medical plan document
Provide guidance alongside their claims administrator, make their plan document follows all applicable laws and describes the benefits the employer is offering to the covered plan members. Confirm with the claims administrator that they can administer the plan document.
Perform an annual plan document review
Review the plan document every year. A variety of factors can necessitate amendments to the plan document.
Select or change the claims administrator
Consider what type of networks, service, data, vendors and programs their business needs. Choose the claims administrator that meets those needs—typically either an administration services only (ASO) plan through a health insurance company, or a third party administrator (TPA) plan. Check to see if the selected claims administrator uses claims best practices such as giving high-dollar claims special attention, etc.
Apply data analyticcs
Provide your employer clients with marketplace and industry benchmarks—this information can provide key insights to help make plan design and coverage choices. Provide additional guidance based on predictive modeling, which can help reduce healthcare risks and costs for the both the covered employee population as a whole and for individual covered employees.
Select stop-loss coverage and deductibles
Analyze a set of factors such as changes in federal and state laws, current industry coverage trends, the employer’s risk tolerance, a decrease or increase in staffing levels, employee demographics, claims experience, and typical medical costs in its current or new geographic location. Based on that analysis, the employer can decide how to change the stop-loss deductibles, modify the policy basis, or add or remove certain features or services. Investigate options to tailor stop-loss coverage to meet the needs of the particular employer.
Perform an annual stop-loss review
Determine how to best adjust deductible levels and coverage selections using the factors listed above. One important consideration should be addressing ongoing high claims. Higher deductibles (sometimes called “lasers”) can be set for particular employees at high risk for higher-cost claims. Some employers are willing to accept the additional risk of a laser at the annual stop-loss renewal. Some employers don’t want to take on more risk at renewal. For those employers, ask the stop-loss carrier about an option that provides no new lasers at renewal with a renewal rate cap so upcoming costs are more predictable.
Leverage resources
Work with the claims administrator and stop-loss carrier to help determine when certain resources will be used. Stop-loss carriers and claims administrators both have resources to help contain costs and support better patient outcomes.
Share cost-containment best practices
The broker, the stop-loss carrier, and the administrator should share what works and look for ways to apply successful strategies more widely.
Follow the plan document
Include clear cost-containment language and ensure that the claims administrator processes claims according to the plan document.
Review the hospital charges
Apply discounts and perform an accuracy review, so the employer pays the correct amount.
Explore wellness programs
Match programs to the particular employee population. Be realistic about savings goals and timeframes, and to understand that the impact of these programs may be difficult to measure. Recent research suggests that wellness programs should focus on fixing the problem of unhealthy behaviors to make an impact on healthcare costs.*
Care navigation and health advocacy
Talk to your clients about the value of providing expert medical opinions, fast access, and personal advisor support for their employees. By supporting their employees in the moments that matter, it can result in better health outcomes for the member and cost-savings for the employer.
* ldana, Steve. 2025. Why lower health care costs is one of the benefits of wellness.
Key Decision Point 1:
The employer, based on its benefits strategy and financial goals, determines how to fund health benefits for plan members. Employers are trying their best to provide affordable coverage to its employees, but the costs of future healthcare is unknown. Especially now, employers want to avoid disrupting their employees, obtain claims and benchmarking data, and have more control over their healthcare spending.
An employer has more flexibility and financial control with self-funding than it does by fully insuring. An employer that self-funds can design the health plan and cost-savings strategy according to its preferences. If an employer fully insures, it is limited to the health plan design options offered by a health insurer.
Why self-fund?
Self-funding provides increased claims-data access, which allows the employer (or its broker or administrator) to make decisions to improve the health, wellness and productivity of its employees and help the bottom line through its ability to:
Self-funded employers, more so than fully insured employers, have opportunities to save. Savings can come from lower taxes due to the different taxation laws. Self-funded employers also have the ability to design a health plan so it can produce savings. In addition, self-funded employers can use cost-containment strategies and programs, which may result in lower-than-expected claims amounts.*
Costs associated with self-funding
When an employer self-funds, it must determine how much risk it’s willing to take and if its cash flow can accommodate the new funding arrangement, including paying for claims, administration fees and stop-loss coverage. For more on claims administration and stop-loss, see pages 6 and 10. In addition, it’s important to consider state and federal regulatory requirements.
Self-funding savings
State and federal laws that apply to funding arrangements
State and federal laws should be taken into consideration when deciding to self-fund.
Select a topic to learn more:
Self-funding vs. Fully Insured
Why self fund?
Self-funding costs
Self-funding saving
Advantages of self-funding
Federal and state laws
PwC’s Health Research Institute (HRI), Medical cost trend: Behind the numbers 2025, PwC.com, 2025. KFF.org, KFF Employer Health Benefits Survey, Summary of Findings, 2024. Figure 10.9, Among Covered Workers Enrolled in a Self-Funded Plan, Percentage Covered by Stop-Loss Insurance, by Firm Size, 2024. KFF 2024 Employer Health Benefits Survey, published 2024 OCT 09. 2024 Employer Health Benefits Survey - Section 10: Plan Funding,” KFF, 2024 OCT 09. Ayers, O., “2024 health benefits strategies: A guide to reducing costs while supporting employee well-being,” 2024 FEB 13. Employer Voice-of-the-customer Research Study conducted by Conifer Research and sponsored by Sun Life. This blind study included in-depth interviews with benefits managers and executives from self-funded employers ranging in size 50 to 8,000 employees. All information according to the Sun Life 2025 High-cost claims and injectable drug trends report, which covers four years of high-cost claims that Sun Life paid. Lupkin, S. All Things Considered, 2025 JAN 14, NPR.org, Drugmakers hiked prices for hundreds of drugs in early January. GoodRx.com, 2025. Tracking prescription out-of-pocket spending. Graphic: Change in List Price for Prescription Medications. GoodRx.com, 2025. Tracking prescription out-of-pocket spending. Graphic: High Costs. Total out-of-pocket spent on prescriptions in 2024. Sun Life book of business data, stop-loss reimbursements from 2021-2024. Employer Voice-of-the-customer Research Study conducted by Conifer Research and sponsored by Sun Life. This blind study included in-depth interviews with benefits managers and executives from self-funded employers ranging in size 50 to 8,000 employees. This content is provided for informational purposes only. Decisions regarding benefit plans, self-funding, and/or insurance coverage should be made in consultation with your organization’s advisors and a licensed insurance broker. Producer use only. Not approved for use in New Mexico. Group stop-loss insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states, except New York, under Policy Form Series 07-SL REV 7-12 and 22-SL. In New York, Group stop-loss insurance policies are underwritten by Sun Life and Health Insurance Company (U.S.) (Lansing, MI) under Policy Form Series 07-NYSL REV 7-12 and 22-NYSL. Policy offerings may not be available in all states and may vary due to state laws and regulations. © 2025 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. The Sun Life name and logo are registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us. SLDX-11144-2
Potential savings for the employer’s benefits plan
Administration (TPA or ASO with a health insurer)
Claims adjudication
Costs
Administrative fees
Stop-loss specific (catastrophic claims)
Stop-loss aggregate (ordinary claims)
Claims (employer’s bank account)
Medical
Reserves
Rx, dental, vision
Employer self-funds the benefits plan
Employers in a fully-insured arrangement are paying taxes on the entire premium, whereas, self-funded employers pay taxes and fees on a smaller stop-loss premium amount. Although there are still premiums for stop-loss coverage, employers can save if their claims are better than expected.
There is a lot to think about when deciding what type of funding arrangement will work best. But the primary driver is often cost, and the ability to control it. Fully-insured plans and self-funded plans often have similar claims costs — because the claims themselves don’t change for the employer population — but self-funded plans have less admin fees and taxes. In the fully insured plan, claims costs are baked into the premium which is larger because it is all claims, not just stop-loss claims.
Insurance company charges a premium to provide a benefits plan
Administration (health insurer)
Potential profit for the health insurer
Premium and taxes
Risk and pooling
General expenses
Claims
Reserves (first year)
Should businesses of a particular size self-fund?
When an employer self-funds, it must determine how much risk it’s willing to take and if its cash flow can accommodate the new funding arrangement, including paying for claims, administration fees and stop-loss coverage. Regardless of employer size, every business needs to consider certain things when deciding to self-fund.
So, the answer to “how small is too small to self-fund” really depends on the employer in question. By following the above recommendations and working with a knowledgeable broker, the employer—regardless of size—can determine if self-funding makes sense for its particular business.
When considering self-funding, there are a few key areas to evaluate: Benefits strategy and financial goals Risk tolerance Cash-flow needs Administration of the plan and access to the data Stop-loss and the appropriate levels7
How much can an employer save by self-funding?**
The Self-Insurance Educational Foundation shared the different ways that self-funded can lead to employer savings: Lower administration and insurer profit costs (typically 15–20% of plan premium for a fully insured plan) Lower premium taxes (only excess-loss coverage premium is taxable) Retained dollars from unspent claims funding
In addition, self-funding provides increased claims-data access, which allows the employer (or its broker or administrator) to make decisions to improve the health, wellness and productivity of its employees and help the bottom line through its ability to: Perform more in-depth utilization analysis and identify claim trends Refine its benefits plan design and options Tailor health management and improvement programs, such as case management, wellness programs, and employee incentives
Self-funded medical plans tend to have lower taxes than fully insured ones. Why? Fewer taxes apply to self-funded plans. In addition, state premium taxes for selffunded plans are assessed against stop-loss insurance premiums instead of health insurance premiums. Stop-loss premiums are typically much less than health insurance premiums, so the self-funded employer gets a comparatively lower tax bill.
Federal laws do not apply
Certain taxes and fees Stop-loss requirements
State laws apply
Some ACA-related taxes and fees ERISA
Federal laws apply
Some state laws apply, but usually not subject to health insurance requirements
ACA is just one example
Health insurance premium taxes Health insurance requirements
Laws do not apply
Some laws apply
Laws apply
* 2024 Employer Health Benefits Survey - Section 10: Plan Funding,” KFF, 2024 OCT 09.
* 2024 Employer Health Benefits Survey - Section 10: Plan Funding,” KFF, 2024 OCT 09. ** Ayers, O., “2024 health benefits strategies: A guide to reducing costs while supporting employee well-being,” 2024 FEB 13
A 2025 Sun Life broker survey determined that better access to data, cost savings, and more flexibility were the primary reasons employers consider self-funding. Specifically, according to brokers, employers look for savings through reduced fees, tax savings and control over benefits plan design.
Typically, an employer will depend on its broker to guide it through the process of funding arrangement evaluation and subsequent decisions. As their broker, you are a great resource to tap – and can advise them on self-funding and stop-loss coverage trends in different industries. You can also recommend ways to manage cash flow and the risk associated with high-cost claims.
Key Decision Point 2:
It's important to have a claims administrator as they play a vital role when considering to self-fund. Selecting a claims administrator determines the provider network or networks available to the employer and its health plan members. In addition, the claims administrator and their approach can have a significant impact on the success of the self-funded strategy and the benefits experience of the health plan members.
Creating the medical plan document
How are claims processed?
Claims best practices
The claims administrator needs to adjudicate claims according to the medical plan document. The employer should ask the prospective administrator to explain how it manages claims costs.
Introduction to Reference-based pricing
Referenced-based pricing support services
Some RBP programs may confirm reimbursement or negotiate with the provider before services occur, while others may defend reimbursement or negotiate after a claim, if there has been an appeal.
Types of Adminstrator
Sending in claims
Processing claims
Intro to referenced-based pricing
Reference-based pricing support services
Selecting a stop-loss carrier
Understanding stop-loss captives
With a TPA plan, employers receive access to local and regional provider networks (and some may also provide a national network), a personalized service model and customization options for plan design, cost-containment programs, and best-fit vendors. An advantage of the TPA approach is that it supports choosing separate vendors for different services (sometimes called the “unbundled” approach, whereby different partners are selected based on their area of expertise). For example, an employer might select a particular pharmacy benefits manager (PBM) or wellness vendor based on their preferred service model or business goals and seek to integrate those services with their medical claim administration.
With an ASO plan, which is provided by health insurance carriers, the employer is typically offered access to proprietary provider networks (which can frequently offer national reach), a standard service model, and set cost-containment programs. The ASO method is sometimes referred to as a “bundled” approach. ASO plans can work well for employers that are comfortable with the standard set of costcontainment programs and vendor choices. Employers that work with ASO plans report that fewer exchanges make a health insurance carrier feel less risky.1
When an employer self-funds, it needs a claims administrator. Typically, it hires another company to administer claims. For most employers, claims administration comes down to two choices:
Some claims administrators are also licensed to advise and sell stop-loss insurance to employers. These professionals are referred to as “broker/administrators.”
Administrators see every medical claim. For instance, a claim might come from a routine doctor’s office visit. Over the past few years, the conditions resulting in the most claims were two different types of cancer, cardiovascular disease, orthopedics/musculoskeletal conditions, and newborn/infant care.2 Here are the common types of entities that send in claims to the claims administrator for payment: Hospitals Outpatient clinics Physicians’ offices
First, claims administrators typically send the employer a template medical plan document. Then, the employer, broker and claims administrator work together to create the plan document. The medical plan document governs many areas, such as the benefits offered and how claims are administered.
Administration — how are they administering claims? What type of planning does auto-adjudication involve? Cost-containment tools — are they available to you and aligned for success? Reporting is on-demand, detailed reporting regularly available and flexible?
Common claims analysis factors include:
Claims can be processed through a variety of methods. In auto-adjudication, a system provides claims analysis and decisions based on criteria developed from the underlying plan document. If a claim is complex, manual adjudication may also be performed to support case management and the use of additional services such as cost containment.
The amount paid to the healthcare provider (such as a hospital) after discounts were applied
Paid charges
The amount that the charge is reduced by based on negotiations
Negotiated discount
The initial amount that a healthcare provider (such as a hospital) charges
Billed charges
The Current Procedural Terminology (CPT)/Healthcare Common Procedure Coding System (HCPCS) identifies medical procedures and services
Service codes
The Clinical Classifications Software Refined (CCSR) identifies medical conditions
Diagnosis codes
Contain costs for high-dollar claims
Negotiate
3.
Assess
2.
Develop
1.
Develop a systematic cost-containment approach toward high-dollar claims. Aspects to consider include understanding the medical plan document language and specifying how to apply it to claim adjudication, determining if the treatments are appropriate and medically necessary, and creating a price comparison protocol.
Negotiation actions might include: Performing a medical bill review (pay special attention to billing and coding accuracy) Performing a diagnosis-related review if the diagnosis is in question Reviewing the medical plan document to determine if it contains UCR language about treatment costs Comparing the medical price to both the average wholesale price (which usually only applies to medications and durable medical equipment) and to Medicare Plus pricing Reviewing opportunities for care outside of a hospital setting to reduce risk of complications and infection and deliver a better care experience
Negotiate with the OON provider and get a signed release showing that the provider accepts the negotiated charge in full and will not charge the claimant the difference (sometimes referred to as “balance-billing the claimant”).
Assess if there are opportunities for cost containment for the services provided. Look at the providers of the services—they could be through the plan’s in-network preferred provider organization (PPO) or out-of-network (OON) providers. Are vendors available (through the claims administrator or stop-loss carrier) that can provide needed medical or specialty services that support improved patient outcomes at reduced or discounted rates? For example, if the medical condition is the need for a kidney transplant, the claims administrator or the stop-loss carrier might have access to a Centers of Excellence facility.
The goal of the RBP program is to bring claim payments closer to their actual cost plus a reasonable margin, potentially resulting in significant savings for self-funded employers.
Physician access still generally requires a traditional network, although some programs will apply RBP to all claims.
Typically only applies to facilities, such as hospitals.
Network replacement
Although it is not for everyone, Reference-Based Pricing (RBP) is an alternative approach to healthcare cost management that aims to reimburse certain medical claims based on a predetermined reference rate (most often Medicare). This may be a smart choice for employers who: Are interested in exploring alternative forms of cost-containment Have an engaged group of employees, willing to actively help control medical costs Have employees located in areas with access to multiple, competing hospitals Generally, RBP programs do not rely on contracts to define reimbursement with a provider, like the traditional network approach. Instead, the RBP program relies on a methodology to reimburse based on a fair market price for the service performed. This can create scenarios where members may be balance-billed (or asked to pay the difference), which is addressed as part of the program. The RBP program manager will tell the members how to best handle this situation.
Claim Negotiation
Plain Language
Claim Audit
Member Avocacy
Legal Defense
Member Education
To support members if provider appeals
Pre-Claim Services
Post-Claim Services
To support RBP services
To let members know what to expect
To support members if balance billed
To replace claims
To determine the most appropriate payable charges, ask the administrator, stop-loss carrier or specialized service provider to conduct the negotiation.
Once the employer has decided to self-fund and has selected a claims administrator, what’s next? Remember, self-funding means that the employer is taking on risk because it is responsible for costs that are not always predictable. In simple terms, without protection against high-cost claims risk, the self-funded employer is vulnerable. Self-funded employers that want to cap exposure purchase stop-loss insurance.
Key Decision Point 3:
How stop-loss works
Stop-loss coverage types
Determining stop-loss coverage
Stop-loss options
Who provides stop-loss?
Common stop-loss contracts
The self-funded employer (or "Plan") purchases stop-loss insurance from a carrier.
The employer pays all the claims of members covered by the health plan.
The stop-loss carrier sends the employer reimbursement dollars for claims costs above a pre-determined amount (referred to as the individual or Specific stop-loss deductible).
For example, if the stop-loss deductible is $75,000 and the claim is $1 million of eligible expenses, the employer pays the $1 million claim. Then, the stop-loss carrier sends the employer a $925,000 reimbursement.
Stop-loss provides reimbursements to the employer for eligible claims. The most common type of stop-loss is called “Specific stop-loss.” It provides protection for the self-insured employer from large claims that occur for any one covered individual. Here's how it works:
Choosing stop-loss coverage
Stop-loss coverage helps the employer by mitigating a portion of the risk of self-funding. Stop-loss insurance “stops the losses” that can result due to high-cost claims. It does so by providing reimbursement to the self-funded employer for claims above a predetermined amount. Most of the self-funded community purchases stop-loss. There are two main types if stop-loss coverage:
Self-funded with stop-loss
Many employers purchase both products, though an employer can decide to purchase Specific stop-loss alone. But how can an employer figure out what products to buy and what coverage level (often referred to as a “deductible level”) makes sense for its business? To determine the stop-loss coverage types and deductible levels that fit best, the employer needs to decide what its risk tolerance is, analyze the health and demographics of its plan members, and develop a general understanding of projected claims costs for its group.
Pay claims, administrator fees and stop-loss insurance premiums
Capped maximum claims exposure
Self-funded without stop-loss
Pay claims, administrator fees, but no premiums
Unkown and uncapped maximum exposure
Specific: Protection from large claims that occur for any one covered individual
Aggregate: Protection from a situation in which the cost of all claims under the Specific deductible is higher than expected
Using the employer’s census data, it is possible to get a sense of how the demographics of the group could affect its stop-loss risk. Factors such as gender and age contribute to the group’s overall risk profile and the likelihood of experiencing high-cost claims. Assessment of potential risk, along with other criteria such as stop-loss deductible level and contract type, can affect the cost of stop-loss coverage. From a broader perspective, it can be helpful for an employer to understand how it compares to groups that are similar in terms of industry and size. Brokers are able to provide industry and marketplace benchmarks on associated stop-loss risks, stop-loss coverage, and deductible level options. Every employer is unique; if an employer knows how it compares to industry peers, it can make more informed coverage decisions.
Interested in getting a benchmark report? Reach out to your Sun Life Sales Representative for more information.
Check our digital experience here to learn more about how you can leverage data to create a successful stop-loss plan!
Want to estimate an employer's stop-loss claims based on employee size and deductible level? Click here!
Common stop-loss contract types
Employers can choose from a variet of stop-loss contracts to meet their needs.
What should the stop-loss contract period be?
Employers need to set the contract period. The stop-loss policy period itself is usually 12 months. The contract period determines which claims are covered under stop-loss. The graphic above shows a few examples. A run-in contract might be offered to add stop-loss coverage for claims incurred before the beginning of stop-loss policy period. A run-out contract extends stop-loss coverage for claims paid after the end of the stop-loss policy period. A carrier might also offer a “paid contract,” which covers claims that are actually paid during a 12-month timeframe. The incurred period, for a paid contract, expands to the beginning of the active policy relationship with the carrier. Brokers should analyze what’s available from the stop-loss carrier and advise the employer on what will work best.
January 1
December 31
Incurred and paid 12/12: Charges incurred and paid during the policy year
Paid 15/12: Charges incurred up to three months prior to and during the policy, and paid during the policy year
Paid 12/15: Charges incurred during the policy year, and paid during and up to three months after the end of the policy year
12/12 Policy period
Options to investigate
To increase the strength of coverage, it’s a good idea for employers to consider available options. Carriers may provide additional products and services that can improve cash flow, manage costs and better align the stop-loss coverage with the underlying medical plan document. On behalf of your employer client, you should explore these stop-loss features with the stop-loss carrier:
Advance Funding
Advance Funding, which improves cash flow by allowing the employer to receive funds before it has to pay for eligible claims
Aggregating Specific Deductible
Experience Rating Refund
Mirroring
Monthly Aggregate Accommodation option
No New Lasers
Renewal Rate Cap
(a higher deductible for a particular plan member) at renewal option
Aggregating Specific deductible, which lowers stop-loss premiums in exchange for the employer retaining more risk
Experience Rating Refund, which returns a portion of stop-loss premium when claims run lower than expected
Mirroring, which aligns the medical plan document with the stop-loss policy to help guard against coverage gaps
Monthly Aggregate Accommodation option, which provides for earlier reimbursement when non-catastrophic first-dollar claims exceed projected monthly levels
No new lasers (a higher deductible for a particular plan member) at renewal option, which can make it easier for employers to manage potential high-cost, high-risk claims
Renewal rate cap, which can help create more predictable renewals and support longer-term budget planning
An employer can get stop-loss from a health insurer or a stop-loss carrier. Some employers choose to get stop-loss coverage from the same company that administers their medical claims. Other companies prefer to work with an independent stop-loss provider.
1. Bundle with a national ASP carrier
This approach means that the company (typically, a health insurer) that administers the self-funded health plan (sometimes referred to as administrative services only or ASO) also provides the stop-loss insurance. The ASO claim administrator adjudicates all claims including first-dollar claims (which are claims that occur before the stop-loss deductible is breached) and claims that are eligible for reimbursement under the stop-loss policy. Using this approach, there is a proprietary network provider (which can frequently offer national reach) and the administration is centralized, but programs and services can be limited to a predetermined set of options.
Using the direct carrier approach means that one company administers the self-funded health plan, and a separate company provides the stoploss coverage. Claims are administrated either by a third-party administrator (TPA) or through an ASO plan provided by a health insurer. A separate stop-loss carrier can provide more flexibility to the employer when it comes to stop-loss coverage options. For example, a stoploss carrier can provide one stop-loss policy that covers multiple administrators. In addition, it can leverage its specialized knowledge of how to make stop-loss most effective for the employer. When this type of plan is in place, the employer can choose among the “plug and play” specialty services—such as enhanced cost-containment programs—according to its needs.
2. Unbundle with a direct carrier
Highly effective stop-loss carriers are adept at working well with all the stakeholders (brokers, administrators, cost-containment vendors, pharmacy benefits managers and others) so administration is seamless for employers. Direct carriers can provide increased employer flexibility and dependable claim reimbursement, especially when they have extensive experience with a particular claim administrator.
To help your clients evaluate stop-loss carrier candidates, look for these key attributes.
Typically, employers provide:
A complete census At least two years of claims history The current/proposed medical plan document A list of plan changes in the last two years The current/proposed claims administrator and network Broker commission percentage Policy requirements, the desired Specific and/or Aggregate stop-loss deductible(s), and the policy basis (timeframe of when claims are incurred and paid)
Employers talk about self-funding
“One size definitely does not fit all, and you have to find what makes sense for your organization.” — Head of Benefits, legal industry, 2,000+ employees
Once an employer selects potential stop-loss carriers, they will need to provide information to the carriers so they can underwrite the coverage. Click here to learn more!
Strong financial ratings from independent agencies Impressive experience in the industry to handle challenges Ability to reimburse the largest claims fast Autonomous underwriting decision-making without reliance on a reinsurer’s approval Leadership based on expertise and client insights
Commitment to the stop-loss industry and to providing educational opportunities Access to cost-containment services and consulting that help support the employer’s self-funding and benefits strategies Self-funding best practices and customized benchmarking data to guide your self-funded strategy Innovative approaches to new employer needs and legislative requirements
High-touch, personal service model based on each member’s needs, goals, and preferences In-depth knowledge of the healthcare system to connect members to local, in-network providers Fast, seamless, objective process to get expert guidance, quickly for any health concern Knowledge and expertise that leads to improved health outcomes, better member experiences and potential cost savings Robust benefits that focus on the care of individuals keep employees happy, healthy, loyal and return to work faster
Stop-loss carrier risk
Reinsurance Aggregate Corridor
Captive member's expected claims in the Captive Risk Layer
25% of expected claims
Reinsurance Aggregate limit
A stop-loss captive is an insurance entity formed and managed by like-minded employers looking to increase control of their employee health benefit programs to reduce overall cost. Specifically, group stop-loss captives allow small employers to gain negotiating power of a larger company by sharing a layer of risk. As with traditional stop-loss, the shared layer of risk in a stop-loss captive is capped by an Excess Limit and a Reinsurance Aggregate.
Employers select a stop-loss captive to pool and share their risk and to reduce their claims volatility, which can ease the transition to self-funding. For instance, when an unexpected high-cost claim occurs, a group captive can absorb the shock and its impact is shared among the pool of employers. More specifically, a stop-loss captive can choose to absorb some of the risks, which may be lasered by traditional medical stop-loss policies, such as certain individuals with large, ongoing medical conditions. On the other hand, when employee claims are at or below the expected level, the employer members share the profit that would normally have gone back to the insurance carrier. This is one of the key drivers and benefits of self-funding.
Owned by members
Hover over each type to learn more!
Stop-loss captives generally have two structures: group and protected or rental cell captives.
Within the group captive category, two types of captives exist: heterogeneous and homogeneous. With the heterogeneous category, employers from many different industries come together to form a collective captive. Generally, this type of captive acquires more participants and can quickly achieve an appropriate spread of risk. In contrast, in a homogeneous group captive, employers from the same or similar industries come together to form a captive arrangement. In this case, employer membership can be smaller; however, their underlying risks and underwriting profiles can be quite similar.
A protected or rental cell captive is owned by parties unrelated to the member participants who insure their risk through the captive arrangement. The protected or rental cell captive may appeal to small employers that want the benefits of participating in a captive arrangement without the responsibility of ownership, governance or management. However, their ability to select service providers for their program (in other words, stop-loss carrier, broker, TPA, etc.) may be limited.
A group captive is owned by its member participants who insure their risk through the captive arrangement. With a group captive, participants own the management of the program and have more flexibility in selecting service providers.
Stop-loss captives
Protected or Rental Cell
Owned by another entity
Group
Run-in
15/12
Run-out
12/15
Enhanced gene therapy coverage
Enhanced gene therapy coverage, which allows employers to focus on the life-changing treatments without worrying about the known and unknown price-tags as more therapies are approved by the FDA
