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John Thornton

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John Thornton is executive vice president, Sales and Marketing, at Amalgamated Life Insurance Company, White Plains, NY. In this role, Thornton applies over 30 years of insurance industry experience to lead the sales and marketing functions of Amalgamated Life Insurance and other entities within the Amalgamated family of companies. His effective strategies have led to Amalgamated Life’s steady growth of its voluntary portfolio and related sales. As a member of the senior executive team, he is actively involved in the operations, oversight and direction of the organization. Thornton can be reached by email at: jthornton@amalgamatedlife.com. Web: www.amalgamatedbenefits.com.

Strategies For Gaining Middle Market Business

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The middle market (defined by many as companies having 200 to 5,000 employees) is without question an attractive sector to target as many middle market businesses are on a strong growth trajectory. The latest Middle Market Indicator Report found that 72 percent of the nation’s middle market companies reported year-over-year growth in 2018 over 2017. Two-thirds also projected revenue increases in year 2018, and 46 percent planned on expanding their workforce. It is not lost on these executives that today’s employees are seeking out organizations that value their health and financial well-being, a finding attested to by the 2018 Mercer Global Talent Trends Study.

Their strong growth patterns aside, there are other traits that distinguish middle market companies from larger and smaller businesses. These traits require a marketing and sales strategy designed specifically for targeting the middle market, whether that be lead gen in b2b or any other kind. By gaining insight into what differentiates these businesses, as well as their challenges, brokers can gain better middle market positioning. Applying this insight with effective marketing and sales strategies will enable brokers to capture greater middle market business opportunities.

A Closer Look at the Middle Market
Forbes Insights conducted a study in 2012 in conjunction with BMO Harris. The study sought to assess the perceptions of middle market business senior executives regarding their companies. The findings from that study still hold today based on later surveys and reports. The study found that:

  • Middle market executives are optimistic regarding their company’s fiscal health and future.
  • Sixty-one percent reported revenue growth over the past two years.
  • Seventy-five percent projected continued growth, with four in ten stating anticipated growth of six percent or more over the following two years.
  • The executives who predicted continued growth for their companies also emphasized their plans to launch new products or services, enhance their internal technologies, and place more emphasis on sales and marketing.

Two other significant findings from the Forbes Insights/BMO Harris study were:

  • Sixty percent of the middle market senior executives said improving their customer experience was their top priority.
  • One-third indicated they were focusing on changing or evolving their business model believing that remaining agile was necessary to thrive.

All of these findings are important for brokers to keep in mind when presenting insurance products and employee benefits to middle market companies. If you consider that growth is a common denominator for a large percentage of middle market companies, and that growth often prompts the need to add employees, you can see why having the right benefits to attract and retain qualified employees would be a high value goal for these companies. The fact that many middle market executives also realize that employees are routinely under financial stress and concerned about health and accessing healthcare, the message from brokers to middle market companies begins to further crystallize. It is this: If you want to continue growing and thriving, and understand the relationship between this goal and having a stable qualified and loyal employee base, you recognize that offering the right employee benefits is critical.

How Middle Market Companies View Employee Benefits
Middle market company executives know just how important their benefit packages are to retaining and recruiting employees. In fact, the Society for Human Resource Management’s 2017 Employee Benefits Survey stated that one third of businesses increased their benefits in 2017 to include more choices. Many also have designed employee financial wellness programs as part of their enhanced employee benefits initiatives, similar to IRAs and even self-directed IRAs which you can learn more about at https://www.theentrustgroup.com/self-directed-iras/what-is-a-self-directed-ira. In 2017, an estimated 84 percent (up from 76 percent in 2016) of large and mid-size American businesses had adopted these programs based on the National Business Group on Health and Fidelity Investments Employer-Sponsored Health and Well-Being Survey.

While many middle market companies have adequate retirement plans, there was room for improvement when it came to other employee benefits along with the financial literacy and health care education support many of their employees needed. While retirement plans are important to employees, it turns out they have a greater amount of stress related to the possibility of having a health crisis that prevents them from paying their household bills, protecting their families in the event of a medical emergency or accident, and other health care related concerns. Given today’s Internet-dependent lifestyles, worries over cyber related threats and protecting their identity and credit have also become major concerns. To illustrate the level of employee concern over these matters, the aforementioned Global Talent Trends Study found that employees spend an average of nine hours weekly worrying about them.

It is for this reason that voluntary benefits have become in high demand by employees and middle market business executives alike. These benefits range from accident, accidental death and dismemberment, critical illness, portable term life, disability and whole life insurance to dental, identity theft protection, legal and hearing benefits. They address the needs of the companies by enabling them to offer robust insurance, health and wellness benefits without having to assume additional costs. They also help their employees gain greater financial security and well-being. Additionally, voluntary benefits give current and future employees choices in benefits to best address their individual/family life stage needs.

For brokers to be viewed as a real resource to middle market businesses for their employee benefits, the right marketing and sales strategies must be deployed.

Communicating with Chief Financial Officers and Human Resource Executives
First and foremost, make sure you are targeting the right executive. While the Human Resource Executive (HRE) is involved in employee benefits, for many middle market businesses the real decision maker will be the Chief Financial Officer (CFO). To be sure you are reaching the right decision maker(s), a smart strategy is to initially communicate on both fronts with the HRE and CFO until one or the other emerges as the single point of contact.

When speaking with a CFO it is important to speak the language of finance and not healthcare. Present value propositions such as how voluntary benefits shift the cost from the employer to the employee and how having employees covered by various policies can help defray corporate health care costs. For example, the employee who has dental coverage and keeps up with routine dental care visits is less likely to succumb to a serious health-related condition such as oral cancers, hypertension, diabetes, kidney failure and/or heart disease. It is also a good idea to bring up medical stop loss to manage high-dollar claims, particularly if you have a product that is highly competitive with robust features and offered by a carrier that is a direct writer.

If speaking with the HRE, recognize that many HREs are more involved with managing employee benefits and not necessarily in the purchasing decision. Where they are a significant center of influence they tend to be more inclined to remain with a current broker rather than disrupt things and consider a new broker. On the other hand, CFOs, based on their backgrounds and roles within a company, tend to be more empowered to serve as “disruptors” when it comes to their companies’ financial matters and financial product selection-whether ultimately purchased by the employee as in the case of voluntary benefits or the company for employer-sponsored health insurance and group life and/or medical stop loss coverage.

What will especially matter to HREs is the support that will be provided to employees at the worksite and beyond to help them make the right benefit choices. Be prepared to discuss the employee communications and product literature that will be available to help employees understand the purpose of each insurance product/employee benefit and exactly what it offers in terms of financial protection and/or health coverage. Since many workplaces now reflect our country’s growing multiculturalism, anticipate a possible need to have a bi-lingual or multi-lingual product specialist at the worksite and/or product literature in multiple languages. In addition, considering that millennials, our nation’s first digital natives, will soon replace baby boomers as the largest generation in the workforce, it’s important to cite online access to product information, member portals and mobile apps, as appropriate-all of which HREs will identify as being responsive to their companies’ employees.

Offering employee financial well-being seminars tied in with enrollment events is another strategy which will win favor with both CFOs and HREs. In addition to the financial literacy component of these events, brokers could suggest that enrollment events also include free preventive medical screenings (e.g., blood pressure tests, skin cancer checks, etc.), nutritional advice and fitness clinics.

Product Selection, Superior Customer Service, Flexibility
In addition to communicating effectively with the right decision maker whether a CFO and/or HRE, be sure to deliver the customer experience a middle market business expects. The three pillars of that experience when selling benefits are: A broad selection of the right benefits, seamless customer service, and a flexibility to accommodate the middle market company’s needs.

Regarding products, a broad portfolio of voluntary benefits is essential. It needs to include the products that will resonate with the specific middle market company’s employee base. This means a broker needs to have a basic understanding of a company’s workforce demographics. Are the employees older, younger, a mix of generations, blue-collar, while-collar, mixed ethnicities, etc.? Knowing this ahead of time will enable a broker to highlight those benefits that may be most meaningful to a particular company’s workforce. Keep in mind that many middle market businesses prefer purchasing voluntary benefits from the same carrier who provides their company’s health care or group insurance. Therefore, if a broker has already sold health or group insurance to a middle market business, that broker is in a better position than another broker to sell voluntary products to that client. Take advantage of that with all existing health care and group insurance middle market clients.

Be open with the carriers you are working with and let them know about the voluntary products your middle market prospects want. If a carrier needs to fill a product line gap by forming an alliance with another carrier to meet your middle market clients’ needs, that is a suggestion to make.

To deliver what a middle market business will consider superior, seamless service, brokers need to think personalization. Middle market companies do not identify with their size or the category of “middle market business.” Instead, they identify with their industry sector and their companies’ workforce composition. For example you are targeting a middle market manufacturer in the aviation industry, recognize that a large percentage of their workers will be blue collar or gray collar (i.e., more technical skilled workers) and a certain percentage may be in unions/Taft Hartley plans that provide benefits. Tailoring the voluntary benefit sales pitch to this manufacturer will require presenting the benefits as a way to accommodate all workers-regardless of their age, income, or ethnicity.

Worksite enrollments rather than self-enrollment processes will resonate with middle market companies. Even for companies with a highly-educated workforce, insurance products and benefits are complex. Offering face-to-face enrollment meetings with benefit specialists on hand will not only appeal to the middle market company’s management, but will also result in higher enrollment. Backing up these meetings with electronic brochures, product sheets, informational videos, etc., available online, is an essential support that middle market businesses will expect and that should be leveraged when marketing to this sector. Also regarding enrollment, being flexible about when employees can enroll, rather than insisting on a certain time of year, will also score points with middle market businesses. The days of the annual, one-time-of-year enrollment period are gone. It’s important that brokers and carriers be reminded that today’s businesses, and especially agile middle market companies, expect their product/service providers to be flexible when doing business with them.

Bringing innovation to the enrollment process will further make a broker more relatable to a middle market business executive. A simple measure such as having a state-of-the-art LED video display running educational videos on voluntary benefits during enrollment events will demonstrate to a middle market business that a broker is willing to go the extra step for a better customer experience.

Through greater awareness of what makes middle market businesses tick and the adoption of effective marketing and sales strategies, brokers can begin capturing a greater share of this growing, fertile market.

Amalgamated Life Insurance Company 2019 Carrier Forecast

Deploying New Strategies to Address the New Market Paradigm

There has been a paradigm shift for insurance carriers closely tied to the nation’s changing demographics. We are seeing the once largest generation, the Baby Boomers, being replaced in size by the Millennials. They are becoming the largest sector of America’s workforce projected by Brookings Institution to comprise 75 percent of the global workforce by 2025. How carriers like Amalgamated Life Insurance Company, now in its 75th year, bring their products to market must also evolve. We are continuing to reach employers and their employees using a distribution model that includes broker partners and our own sales team. Our marketing and sales strategies are changing to reflect the new workforce and our goal is to more effectively bring our insurance solutions to underserved and emerging markets. These strategies reflect an understanding of the attitudes and needs that prevail within these sectors.

Attitudes and Latitudes
Enter a number of disparate workplaces and you are likely to see Baby Boomers (Born 1946-1964, 54-72 years old) ready to retire, alongside Generation X (1965-1980, 38-53) and the Millennials (1981-1996, 22-37), as now defined by the Pew Research Center. In speaking with members of each group, it is clear that they have different attitudes about life and insurance—which products are most meaningful to them, and how they want to purchase them. While Baby Boomers show a clear interest in critical care insurance, accident or disability insurance holds a higher interest among Generation X and Millennials. Whereas Baby Boomers may be more comfortable with receiving an in-person sales approach, the younger generations are less intimidated by online insurance purchases. That is unless they are presented with a better way, which we, at Amalgamated Life Insurance, believe is bringing insurance solutions right to them at the worksite and having knowledgeable product specialists on hand to answer questions and build the employees’ insurance literacy.

It is not lost on us that insurance sales have been growing slower in recent decades than years past. McKinsey & Company reported that the U.S. life insurance industry’s average annual growth over the past ten years has been less than two percent, despite the fact that there exists a large untapped market. Specifically, McKinsey cited that individuals in 57 percent of the estimated 68 million U.S. households do not own individual life insurance. Of those that do, many only have a basic group policy. The reason frequently given for not purchasing insurance is a lack of product understanding. This is not the only obstacle for carriers.

Mitigating Obstacles, Maximizing Opportunities
It is definitively more challenging to sell insurance today than it was in the preceding five decades. We now have different generational attitudes and digital technology disruptors (i.e., e-commerce sites, apps and data analytics presented in various social channels) to address. There are also some of the perennial obstacles that insurance marketers face such as a lack of understanding and misconceptions about cost. The recently released LIMRA Insurance Barometer 2018 found that 63 percent of consumers do not buy or do not buy more insurance because they perceive it to be too expensive. The same LIMRA report also found that 44 percent of Millennials overestimate the cost of life insurance by five times the actual cost. Uninformed cost perceptions also exist among the other generations. So what are we at Amalgamated Life doing about it? Our marketing strategies have made insurance literacy a top priority along with a distribution model that includes selling voluntary products at the worksite, expanding our voluntary product line, building our brand, and streamlining our processes.

Promote Insurance Literacy
To better educate consumers, we have developed communications, blogs and product literature that are written in more laymen’s terms, and which clearly convey a product’s features, terms and role in supporting their financial security. Our product sheets are easily accessed on our website which was redesigned this year to be more consumer and mobile friendly. In the near future, we plan to produce short educational product videos as another layer in our insurance literacy strategy. We market our voluntary products at the worksite where there is a product specialist on hand to explain the product and its value proposition. Our product sheets are also offered for employees to take home with them so they can discuss a product with their spouses or other family members.

Cater to the Underserved Middle Market and Emerging Markets
Like the industry as a whole, we have identified a large underserved middle market that consists of consumers with annual household incomes of above $75,000 and accumulated financial assets of no more than $150,000 (Ernst & Young), or the consumer segment with $100,000 to $250,000 in investable assets (McKinsey). These consumers are represented across many of the multi-employer, Taft-Hartley and single-employer customers we serve. The strategies we are deploying to build insurance literacy are designed for this group, perhaps more than any other category. Typically, the higher skilled and/or professional workers have accountants, insurance professionals, lawyers and, in the case of the highly compensated worker, financial advisors to help them navigate various insurance and financial instruments. The middle-market consumer does not. These consumers do, however, want financial protection and seek out insurance at critical life stages coinciding with such events as marriage, new home purchase, birth of a child, caretaking of a parent, and retirement. We recognize the middle market is not a “one-size fits all” category. There are multiple generations represented from 25-year-olds to early-to-mid-60s (pre-retirement), each having different financial goals. When bringing our voluntary products to the worksite, our product specialists are sensitive to what may be important to an individual based on their life stage and take a personalized approach.

There is also the largely untapped mass market of consumers with $25,000 to $100,000 in investable assets (McKinsey), an emerging market that also requires that we leverage life events that have been found to prompt a life insurance purchase (i.e., marriage and a new baby). By understanding the demographics in any given employer’s workforce, we can be prepared to tailor product presentations accordingly.

A primary strategy we have deployed is to create a comprehensive portfolio of voluntary benefits. This demonstrates to employers that we are a market-responsive carrier that continues to bring high demand employee benefits to their workforce. In addition to our accident, AD&D, critical illness, disability and whole life insurance, we have expanded our line with other voluntary benefits such as dental, hearing, ID theft and credit monitoring, and legal. In 2019 we will be adding a portable term life insurance. With our finger on the pulse of what the different generations, middle-market and mass-market consumers want, we are continually looking for the next product offering. Concurrently, we are building brand awareness with our primary distribution channel, brokers, through institutional advertising in key trade publications. By deploying all of these strategies with focus and discipline, we continue to grow our business while supporting the financial security and quality of life needs of more working people. [JT]

Affordable Care Act Places The Spotlight On Medical Stop Loss

The Patient Protection and Affordable Care Act (ACA) has ushered in many changes to our nation’s health care system. Most notably, it is prompting an increase in self-insured plans and along with it, medical stop loss insurance. For brokers, these developments represent new opportunities and challenges. There’s the opportunity for brokers to further position themselves as true resources by helping companies make the right decisions relating to self-insuring and medical stop loss coverage.

Concurrently, brokers themselves need to have full grasp of the many moving pieces affecting these areas; areas made even more dynamic by changing state regulations and consumer watchdog efforts concerned about self-insured plans, medical stop loss, and their potential for side-­stepping some of the ACA’s regulations intended to protect consumers. Understanding the changing landscape and how best to serve clients interested in self-insured plans and medical stop loss is critical for brokers serving the self-insured market.

The Affordable Care Act’s Impact On

Self-Funding and Medical Stop Loss

According to the 2011 Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 60 percent of covered employees work for firms that either partially or completely self-fund their health benefits. Of these firms, 58 percent of covered individuals work for firms that have stop loss insurance in one form or another. Typically, stop loss insurance is purchased at a higher rate by smaller organizations than larger ones. Further, smaller organizations usually have smaller specific deductible amounts (i.e., the point at which stop-loss coverage begins) than larger organizations. On average, larger organizations with 5,000 or more workers will have specific deductible amounts of $300,000 or more, compared with $50,000 to $100,000 for smaller organizations with 50 to 199 workers. The lowest specific individual deductible for smaller groups is generally around $20,000. The attachment points for aggregate stop loss are usually set at approximately 125 percent of a group’s projected claims level. With the passage of ACA, these figures may change.

In its June 29, 2012 response to a Request for Information (RFI) from the Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration (Washington, DC), the American Academy of Actuaries Stop-Loss Work Group (www.actuary.org) reported that:

• The increase in self-insured plans is likely to increase because these plans are not subject to ACA’s medical loss ratio (MLR) requirements.

• ACA’s MLR requirements on fully-insured plans may prompt some insurers to reduce or not pay commissions on these plans, therefore prompting more brokers to steer their clients to self-fund so they can be paid on a commission basis.

• Because of ACA’s 3:1 age-rate-limit requirement, companies with younger and predominantly male workers may find self-insuring more beneficial.

• The elimination of various rating characteristics (e.g., average group morbidity, industry, group size) by various states, along with ACA’s 3:1 age-rate-limit requirement will cause premium increases for groups which before ACA may have had lower-than-average rates.

• As a result of ACA’s elimination of lifetime maximums, most stop-loss insurers have been increasing the specific stop-loss maximum from what was typically $1 million or $2 million to an unlimited lifetime maximum.

• Also due to ACA, aggregating specific coverage will now reimburse an employer/plan only if the total of one or more individual claims over the specific stop-loss attachment point exceeds the aggregating specific attachment point. The example cited by the American Academy of Actuaries Stop-Loss Work Group in its RFI response was: “A group may be reimbursed when the total of individual claims over $150,000 (i.e., the individual stop loss) exceeds $200,000 (i.e., the aggregating specific attachment point). While unlimited coverage options were available preceding ACA they are now mandated.

Heightened Scrutiny of Self-Funded

Plans and Medical Stop Loss

Because ACA has inadvertently made self-funded insured plans a much more attractive option to many more organizations, it may have, in fact, also placed these plans at risk. In its mission to assure health care coverage for all Americans by developing state insurance exchanges where lower cost insurance could be obtained, it failed to consider how small businesses would be affected, nor did it take into account self-insured plans or medical stop loss. While all of ACA’s regulations/consumer protections apply to fully-funded small group plans, not all apply to self-funded plans. Those regulations that do apply to self-funded plans include: the ban on annual and lifetime plan limits, the ban on insurers retroactively canceling a policy except in fraud cases, the ban prohibiting discrimination against individuals with pre-existing conditions, the requirement of coverage for dependent children up to age 26, and the required coverage of preventive services (except for grandfathered plans).

ACA’s lesser burden on self-funded small groups coupled with its failure to regulate stop-loss policies, is expected to prompt more small businesses to self-fund. This, in turn, may cause older workers with presumably higher medical costs to fall into the fully-insured small-group market, which many industry observers anticipate will cause premiums in the fully-insured small business market to increase by as much as 25 percent. Where stop loss factors into all of this is that it is readily available to self-insured plans without any regulation which can further drive up costs for fully-funded plans.

Stop-loss carriers also have expressed some concern regarding the requirements ACA does place on self-funded plans (e.g., unlimited lifetime maximums for underlying medical plans). This has prompted the estimated 35 stop loss carriers in the nation to take a hard look at their self-funded plan policyholders’ claim histories and consider premium increases and/or restrictions on their stop-loss insurance. Keep in mind this statistic reported in the 2013 Aegis Risk Medical Stop Loss Premium Survey: 97 percent of stop-loss contracts contain an unlimited lifetime maximum. Consequently, stop-loss carriers have the option to raise their prices to a level whereby the coverage is fully included in its rates or consider selectively removing certain claimants. The problem carriers are facing is they can no longer confidently predict what funds should be held in reserve to meet their claims when now unlimited lifetime maximums exist. While the larger self-funding employers are better able to spread the risk associated with potential catastrophic claims (e.g., oncology treatments that cost hundreds of thousands of dollars a year for many years, or treatments for certain cardiac conditions or genetic diseases such as hemophilia, which can cost in the millions), this is not the case for smaller businesses.

More Shifting Ground at the

State and Federal Levels

All of these new considerations have not been lost on the states. Many are aggressively moving to change the rules relating to self-funding and stop loss in the post-ACA era. Among the states that have introduced new laws already are California, Colorado, Rhode Island and Utah. Here’s what they have passed:

• California—New requirement that stop loss insurance purchased by a business cannot exclude any employee from coverage due to his/her medical history.

• Colorado—Raised the state’s minimum specific attachment point from $15,000 to $20,000 for stop-loss policies sold to employers with 50 or fewer employees and prohibits aggregated attachment points below $20,000 for these policies; introduced new consumer protections for stop-loss policies sold to small employers (e.g., prohibits identifying individuals in the group and excluding them from coverage or changing their specific attachment point levels to protect the policy issuer from higher risk employees or dependents, requires stop-loss insurers to disclose to their insured groups policy renewal provisions, and limitations on coverage and the employers’ maximum  liability for claims incurred before but not processed until after a policy is terminated); and establishes data reporting requirements for stop-loss insurers.

• Rhode Island—Established minimum attachment points for stop-loss policies (i.e., $20,000 for individual and 120 percent of expected claims for aggregate).

• Utah—New requirements for stop-loss insurers that must now cover incurred and unpaid claims if a small employer terminates its coverage.

In addition to actions at the state level, two state legislators, Representative Bill Cassidy of Louisiana and Senator Lamar Alexander of Tennessee introduced the “Self-Insurance Protection Act.” This legislation, which would amend the Employee Retirement Income Security Act (ERISA), is intended to clarify current law and prevent federal regulators from re-defining stop-loss insurance as traditional insurance, which they believe may cause self-insured companies to discontinue their employee health plans. Their goal with this legislation is to protect the employees of smaller and middle-market companies, as well as Taft-Hartley Plan members and public sector workers from losing their health benefits.

Finally, the existing “National Association of Insurance Commissioners (NAIC) Stop Loss Insurance Model Act,” which was established in 1995 and set minimum specific and aggregate deductible amounts for stop-loss coverage, is also under review for possible changes. Under consideration is changing the minimum specific deductible to $60,000 per insured individual from $25,000, and the whole plan deductible from $4,000 times the number of people in the plan to $15,000 times the number of people in the plan. Currently, only three states have adopted the entire NAIC act (Minnesota, New Hampshire and Vermont), and 18 states have adopted parts of the act. However, approximately 25 states do impose some regulations on medical stop loss. Maryland, for example, applies a minimum specific deductible amount of $15,000 and a minimum aggregate attachment point of 120 percent of expected claims for the small group market in its state.

Helping Clients Make the Best Decisions

Given the swirling circumstances surrounding self-insured plans and medical stop-loss insurance, brokers need to be especially proactive when guiding their clients toward a decision to self-insure and purchase medical stop-loss insurance. Self-funding still holds many benefits. Self-insured plans still are exempt from more federal and state mandates than are fully-insured plans. Self-funding offers enhanced cash flow benefits in that they minimize the time between employer funding of claims and actual payment of claims. Further, there are significant savings to be derived from self-funding, particularly if the claims are lower than anticipated. Additionally, self-funding offers lower taxes on premiums.

On the risk side, employers of self-funded plans do assume greater risk if claims should come in higher than expected. For instance, if an employee or employees suffer catastrophic illness(es); particularly critical given the ban on lifetime maximums. There are also other potential circumstances which could significantly drive up claims (i.e., multiple employees involved in a serious, life-threatening accident or exposure to a toxic substance leaving many with a chronic health condition). For this reason the industry in which the business or group’s employees/members work should also be carefully considered, along with the organization’s employee demographics (i.e., age and gender composition, geographic region where plan participants live, and related medical histories). The organizations, too, should be assessed for their overall stable claims experience, stable workforce/member base, financial stability and a commitment to managing claims and encouraging “healthy” worker/member behaviors such as through initiating wellness programs, worksite screenings, and health-related seminars. Organizations that utilize a third-party administrator (TPA) to manage their claims, as well as medical case management services, are also better candidates for self-funding than those who do not.

As for whether individual or aggregate stop-loss coverage is the best choice for a client, that too must be considered in the context of the employee/member group. Here is where working with a competent carrier—one which will provide flexible options in coverage—is critical. Specific stop-loss coverage is designed to protect plan sponsors from less frequent but potentially more catastrophic member claims. Aggregate stop loss is designed to protect the plan sponsor’s plan from the cumulative paid claims of all member claims in a policy period that are less than the designated specific stop-loss deductible. The decision to purchase individual or aggregate stop-loss coverage should be made based on the group.

Brokers, working on behalf of their clients, should consider carriers who can offer:

• Specific stop-loss options including: flexible claims basis (run-in protection—stop-loss coverage of claims incurred prior to the stop-loss contract period; run-out protection—stop-loss coverage for claims paid after the end of the contract period; and paid options); aggregate specific deductible; specific extensions; and terminal liability option.

• Aggregate stop-loss options, including: corridor set at 125 percent and others by exception.

Other criteria which should be sought when selecting a carrier for stop-loss insurance include:

• A.M. Best “A” (Excellent) rated, attesting to strong financial condition and claims-paying ability

• Discounts for high-performance PPOs, TPAs and medical management usage by the insured

• Access to high quality transplant networks

• A history of timely disclosure decisions

• Claims management services

• Accurate and timely claim processing

Armed with an appreciation for the challenges and changes affecting self-insured plans and medical stop loss today, brokers can position themselves as valuable partners to their clients, guiding them to make the best possible decisions.