A MATRIX Minute by MATRIX Group Benefits, LLC
The first half of 2020 has been a continuous series of unexpected surprises. New specialty drugs, new cellular and gene therapy, new transplant procedures, increased provider charges and decreased contractual adjustments, expanded use of Artificial Intelligence and robotics, virtual physician visits, and Covid-19 highlight the first half of the year. Virologists developed at least one new gene therapy in FDA review. Look for more advances using non-harmful viruses in the future. These changes, coupled with the temporary closures of elective and non-emergency hospital admissions and outpatient procedures, deferral of medical visits and treatment, and the resultant changes in claim patterns have disrupted stop loss markets and ushered in a new period of financial anxiety within the industry.
Concerns about extreme costs associated with new specialty, biologic and orphan drugs, and cellular and gene therapy, raise issues of affordability for self funded plans and reinsurers. Unlike other medical insurance products, stop loss insurance does not have additional streams of income to support it. Large ASO insurers and first dollar insurers create additional income through administrative services, owning provider networks, providing PBM medical management and telehealth services, and selling ancillary insurance services. These additional revenue streams also help ASO insurers adjust rates by line of coverage to increase the attractiveness of proposals. Stop loss insurers and reinsurers do not have such additional lines of coverage.
As stop loss markets analyze the potential financial impacts that will result from the lag in medical care caused by the COVID-19 pandemic, the costs of the new drugs and medical procedures, and contract changes by providers during the first six months of 2020, we can anticipate that stop loss premium rates and perhaps some policy terms with be affected.
For plan sponsors, the time is now to begin evaluating what changes in benefit coverage can be considered. Should alternative provider networks be explored? Should a change in the approach for coverage for out of network providers be considered? Should different coverage for extraordinary drug expenses be considered? Should new limitations for extraordinary medical procedures be investigated? Should specialty/direct contracts for certain types of medical care/procedures be explored?
Plan sponsors should be proactive in their evaluation of options to protect against surprises from the stop loss market at the time of renewal. Waiting until markets react puts plan sponsors in the unenviable position of having to make quick decisions with limited options.
Uncertainty impacts every facet of business. The stop loss industry and employer self funded benefit plans are not immune to the environmental changes taking place. Taking the time now to devote to risk assessment and planning will provide dividends during the renewal process.
Inviktus 