A MATRIX Minute by MATRIX Group Benefits, LLC
One thing is certain in the world of medical stop loss – nothing makes a lot of sense. From year to year, we all expect market cycles; good claim years in which insurers are profitable generally means a softer market and rates may be stable or even reduce somewhat. Conversely, when insurers incur claim losses, it generally results in a hardening of the market, and rates increase. With the new transparency regulations on hospital pricing in effect, there was some anticipation that providers would back off price increases, and insurers would be able to avoid some of the predicted rate increase trends. Unfortunately, none of that seems to be occurring.
Matrix recently quoted medical stop loss coverage for an employer sponsored plan and provided a competitive Platinum Program quote. The incumbent proposed a renewal premium increase of forty-five percent (+45%). When the competitive quotes were reviewed the incumbent revised their renewal proposal to a reduction of five percent (-5%) below the current rate. How does any underwriter explain a swing of fifty percent (50%) in their proposal? The obvious answer is rate it up and take as much as you can get until questioned and then back off.
Matrix provides consultants and plan sponsors with a choice of underwriting approaches. Platinum, a manually underwritten model designed for financial stability and predictability, and Gold, a more experience driven underwriting model that adjusts based on market and actuarial trends. Platinum provides caps on the amount of rate increase based on leveraged trend and a pooled risk for large claims. These value-added features have been in place for the entire twenty years that Matrix has been in business, and with Matrix Risk Management Services has saved plan sponsors hundreds of thousands of dollars over the years. The Gold Program does not include the value-added features but provides rate change predictability based on the premium “rate to manual” and experience loss ratios. Both programs provide highly manageable, and explainable annual rate changes.
Current reports indicate the trends for the next twelve months are for increases in premium rates and claim costs. The trends are the result of claim losses, provider increases in pricing, approval of new orphan, biologic, and specialty drugs, new medical technology and procedures including expanded use of AI and robotics, and the unknowns associated with COVID-19. As plan sponsors anticipate the next renewal of their medical stop loss coverage, they should spend time reviewing their claim experience for the past thirty-six (36) months, current plan year large and emerging claims, the impact of provider-payer networks, and the structure of their medical stop loss contract to identify strategies to consider for their renewal. This renewal cycle is a good time to comprehensively review your plan in its entirety and identify cost management strategies you could adopt and implement for the new plan year.
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