Which Option is Best For You?
| By Crystal Williams, President of RxReins, underwriter for SourceRx Stop Loss Insurance Policy
Regardless of the underlying prescription drug benefit plan, most self-funded employers choose to purchase some form of Stop Loss or Excess Loss Insurance to limit their overall liability to adverse claims frequency and severity incurred by the benefit plan.
Stop loss coverage is essentially an insurance policy with a large deductible. The policy may be purchased by the trust, in a trusteed program, or by the employer in a non-trusted plan, such as a “general asset” plan. The three most common types of Stop Loss Insurance are Aggregate, Specific and Guaranteed Cost (i.e. Level-Funded).
- Aggregate Stop Loss is a reimbursement contract which is settled on an annual basis. Each option offers a corridor ranging from 115% to 125% to fit the employer’s risk tolerance and cash flow. The corridor is the difference between the employer’s expected claims and the point at which Stop Loss protection begins, also known as the attachment point. Employers who are comfortable taking risk may choose a higher corridor and an employer who is less risk
tolerant may choose a lower corridor. The higher the corridor the lower the premium.
- Specific Stop Loss Insurance protects the employer from excess claims for one individual and will cover any claims in excess of the deductible. Specific deductibles range from $50K to $1M per individual.
- Guaranteed Cost is designed as a fully insured hybrid. The employer’s risk is limited by paying a fixed cost each month. Like a fully insured plan, the employer is not liable for eligible claims in excess of the monthly fixed rate.
Which option is best for you?
An employer typically purchases a policy based upon their risk tolerance. Smaller more risk adverse employers are more likely to purchase a Guaranteed Cost or Aggregate policy as the corridors are smaller and the employer less exposed to financial loss. Larger employers typically purchase Specific Stop Loss policies as they can withstand larger deductible and financial liability.
For more about Stop Loss Insurance for Prescription Drug plans, contact Crystal Williams, President of RxReins at (888) 797-3467 (ex. 1). To learn more about E&I’s SourceRx contract, contact your Member Relations Representative or Lindsay Taloy, Contract Support Executive, at firstname.lastname@example.org.
Read more: Download the SourceRx Stop Loss Policy Options here.
About the Author
Crystal Williams is the President of RxReins, underwriter for SourceRx Stop Loss Insurance Policy. The longest-standing non-profit pharmacy benefits management (PBM) program and the only nationwide publicly procured PBM contract, SourceRx offers E&I members significant savings on prescription drugs from CVS Caremark and OptumRx.