Each year as health costs continue to rise, employers look for innovative and alternative ways to cut their healthcare costs. Self-funded insurance has become attractive to employers looking to cut costs because it removes excess premiums paid to fully-insured carriers and only pays for the needs of the employer population. Making the switch from a fully insured model to a self-funded plan does involve risk, so stop-loss insurance is put in place to hedge that risk. Learn more about stop-loss insurance here. Stop-loss insurance is not healthcare insurance but rather business liability insurance that protects employers from catastrophic claims.
Stop-loss kicks in when an employer’s population meets the specific or aggregate deductible. To ensure groups get the most out of their stop-loss, there are measures they can take to make sure stop-loss reimbursements never get denied.
For stop-loss policies to reimburse claims the following must hold true:
The reimbursement is on behalf of an individual qualified as an eligible participant in the health plan at the time the claim was incurred.
The claim was covered under the health plan and the claim happened during the time there was stop-loss coverage.
The health summary plan document must coordinate with the stop loss policy and measures need to be taken to ensure there are no gaps in coverage.
Unfortunately, there are times where the plan member or employer has a situation where their stop-loss policy could deny their reimbursement. The stop-loss carrier can grant exceptions but has no obligation, which could leave employers vulnerable.
HOW TO MAKE SURE STOP-LOSS CLAIMS GET REIMBURSED
First example:
It all comes down to the intricate details. In a recent court case, a member of a stop-loss plan incurred over $250,000 worth of claims, however; it was denied because the individual did not meet the qualification for coverage as a full-time employee while she incurred these claims. According to the case, “Under the section titled "Who Is Eligible," the Plan states that "you are eligible to participate in this plan if you are a regularly assigned, full-time employee for at least 3 consecutive months and are regularly scheduled to work a minimum of 40 hours per week."
The employee took Family and Medical Leave (FMLA) and once her time was met, she switched to Short-Term Disability (STD) insurance. However, under the stop-loss carrier qualifications, when she switched to STD insurance, she was no longer considered a full-time employee. Her claims during this time were denied. The court ruled in favor of the stop-loss carrier as she did not fall within the written plan document.
A takeaway from this example is to be vigilant whenever a notable change in someone’s insurance or employment status is made. Whenever there is a change from the original plan, it’s important to refer to both your self-funded plan as well as your stop-loss agreement to make sure people fall under the appropriate coverage.
Second example:
One of the more common issues of why stop-loss gets denied is when a person falls in a coverage gap. Just because a plan ends at midnight on January 1, doesn’t mean there is seamless coverage through the next day.
Coverage gaps are unfortunately common and usually occur when companies are transitioning from one plan to another or completing an acquisition with another company.
To prevent this, there are several contract terms that can help cover organizations on either side of a contract. Commonly known as, “run-in” and “run-out” coverage. Meaning, claims will still be paid prior to your contract date or after your contract date, usually spanning between 3-36 months.
A few more examples of why people would get denied under their stop-loss insurance include:
1. A claim that is ineligible under the group’s health plan.
A good example of this is incurring claims related to experimental treatments.
2. A person who is ineligible for enrollment.
Usually, a dependent that is not covered by the group’s health plan.
3. Late enrollments
Someone who missed their deadline to enroll and starts incurring claims costs while not covered.
4. Lasered person exceeds reimbursement limits
A lasered person is a singular participant in your plan that incurs larger claim expenses than the rest of your population, so their deductible is higher. Stop-loss insurance doesn’t have a limitless cap and will only cover participants to a certain point beyond what the employer already has.
Self-funded insurance can be a powerful tool for companies to save on their healthcare costs. Stop-loss helps alleviate some of the risk when transitioning from a fully-insured model. With decades of experience building custom self-funded plans and shopping stop-loss, our team is ready to help you build the plan that’s right for each group. Contact us today to see how we can help you find the perfect plan.
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