The very thing that’s supposed to protect plan sponsors from high drug claims is turning on them.
Wayne Farrow is seeing firsthand how huge increases in stop loss insurance are wreaking havoc on plan sponsors.
An advisor and president and CEO of Benefits Alliance Group, one of his clients in particular is feeling the crunch, with three employees taking drugs that are over $100,000.
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Despite EP3 pooling, the insurance carrier is trying to change the pooling charge from 17 per cent to 42 per cent. “That’s a huge number and we’re going to see more of that,” said Farrow. “This is just the beginning.”
Now, the very thing that’s supposed to protect plan sponsors from high drug claims is turning on them.
Stop loss insurance is supposed to provide protection against catastrophic or unpredictable losses, but the rapid increases of high cost drugs have filtered down to plan sponsors.
“We’ve seen quite a substantial growth in the premiums that groups are having to pay,” said Mike Sullivan, president of Cubic Health. “Premiums are increasing substantially because their experiences are increasing much more so now than we’ve ever seen before. We’ve seen groups that are seeing 20 per cent increases in the premiums that they’re paying.”
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The numbers are bearing it out too.
The U.S. business group of Sun Life Financial reported a tenfold increase in the number of individual $1 million or more catastrophic claims paid by the company between 2010-2013.
The total of all stop-loss claims reimbursements during the four-year study was $2 billion. If the first-dollar claims for catastrophic conditions are added to the stop-loss claim reimbursements the overall cost of the catastrophic conditions was $4.4 billion.
“I want to say it’s not sustainable but we said that about drug costs 15 years ago,” said Farrow. “I think what will likely happen – this client is a good example – they’ll assume more risk. They’ll look at their claims and say what are the chances that this is going to happen again and try to do some analysis and maybe they’ll assume more risk and increase their stop loss level. Then of course you’re back to the employees paying more. It has to come from somewhere.”
“It’s really, really substantial and I don’t see any end to it to the extent that the market stays the same way,” said Sullivan.
