For the last several years, we’ve highlighted the dramatic market trend of employers adopting self-funding and the rationale supporting the move. As premium dollars have left the insured medical market, lots of those dollars have moved to the reinsurance markets with employers offloading the tail risk associated with their self-funded arrangements. Meeting the demand have been a wide range of new entrants; Guardian a couple years ago, Berkshire last year and UNUM next, are all joining the already vibrant market littered with very highly regarded players such as Voya, Sun Life, HCC (which just bought AIG’s book of business), Symetra, HM and SwissRe. And of course, the major medical carriers have been doing their best to retain as much of this risk as possible.
The good news for our clients is the market has never been so soft. That has obvious implications on pricing, but also on the contract provisions such as advance funding, no lasers upon renewal, early lock-in and retiree / international protection. Historically, it was difficult getting many of these embedded in policies whereas today they are standard offerings.
The bad news is that it becomes harder to track nuanced differences between many of the carriers. As an example; for clients who want terminal liability protection, some carriers apply a massive upfront load while others apply little and only charge upon trigger. For clients looking for high or unlimited aggregate maximums, those will vary widely too. And final disclosure protocol is all over the place. Not to mention eligibility determinations and claim processing speeds!
While the stop loss market has never been so compelling, it’s never been more complicated. In this age of market softness, it’s vital that brokers know what they are selling and clients know what they are purchasing. When you’re dealing with protection on million dollar claimants, price is just one factor. We certainly suggest employers test the market, but make sure it’s being done with a knowledgeable broker and with two eyes wide open.