What Is a Laser in an Employee Benefits Group Health Plan?
The Company
350+ employees Fully insured plan
The company’s renewal is very large (over 30%); it has between 5-8 large claimants yearly. Some of the claims were ongoing.
The Challenges
A large claim of over $600,000 (and ongoing) Current fully insured renewal would include anticipated future costs.
In the fully insured world, ongoing claims are assumed to continue. Every fully insured plan has a pooling point, i.e., a limit to the dollar amount of claims that will be charged against the plan. Even if the large claimant dropped off the plan for some reason (i.e., they get coverage with a spouse or new job), between the claims paid amount below the pooling point, plus the pooling charge premium load, the company would still pay for the claim going forward, again, even if the claim goes away.
The Solution
Moved to a self-funded plan
Given a $400,000 laser for large claimant
To help save money, the company moved to self-funding and was given a $400,000 laser. Lasers, in insurance, are common in self-funded plans, where the company takes on an additional claim risk in exchange for lower premiums. So in this case, the company pays the first $400,000 of claims before their stop-loss carrier picked up the rest of the claims.
The Results
Claimant dropped off company’s plan during open enrollment
Company did not have to pay the $400,000 laser
Reduced stop-loss premiums for everyone in the plan for the full year
Premiums did not include any loaded renewal rates
Having the laser not only lowered the premiums but also allowed the company to reap the benefits and savings in this case and going forward, should circumstances change during the year and claims never materialize.
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