 |
AGENDA ITEM REVIEW FORM |
3.A.
Special Employee Benefit Trust Board Meeting
- Meeting Date:
- 04/05/2023
- Department Head:
- Adela Cortez
- Submitted By:
- Maria Barajas Gutierrez, Human Resources Coordinator, Human Resources Department
ITEM:
Discussion and possible direction to executive advisors or broker/consultant on any and all matters regarding Stop Loss Insurance. (Susan Posada, Broker and Consultant)
SUMMARY:
Stop Loss Insurance (aka “excess insurance”) is an insurance product that provides protection against catastrophic or unpredictable losses. It is purchased by employers who self-fund their employee benefit plans but do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles.
Our current stop-loss insurance (Symetra Financial) covers amounts in excess of $50,000 per claim. Due to a number of high claims during this fiscal year, the carrier’s loss ratio was over 100% last year, and it is expected to be over 100% again this year due to one anticipated costly claim. Furthermore, due to this anticipated high claim, expected at above $500,000, Symetra Financial decided to assign a higher specific deductible for that one claim to be insured for an amount of $605,000. This practice of assigning a higher specific deductible for an individual claim that is likely to exceed the specific deductible is called a "laser" in stop-loss insurance.
As a result of the above-mentioned, premiums will increase, and the carrier is offering the following options:
• Policy with Laser of $605,000 – requires a 37.47% increase to the specific premium, which projects a total annual premium of $898,561.68
• Policy without Laser - requires a 78.01% increase to the specific premium. The annual premium would be $1,163,540.28
Once we became aware of these premium rate increases, in collaboration with Human Resources, we initiated research for other stop-loss carrier options. We received a proposal from Matrix Group Benefits, which outlines the following:
Our current stop-loss insurance (Symetra Financial) covers amounts in excess of $50,000 per claim. Due to a number of high claims during this fiscal year, the carrier’s loss ratio was over 100% last year, and it is expected to be over 100% again this year due to one anticipated costly claim. Furthermore, due to this anticipated high claim, expected at above $500,000, Symetra Financial decided to assign a higher specific deductible for that one claim to be insured for an amount of $605,000. This practice of assigning a higher specific deductible for an individual claim that is likely to exceed the specific deductible is called a "laser" in stop-loss insurance.
As a result of the above-mentioned, premiums will increase, and the carrier is offering the following options:
• Policy with Laser of $605,000 – requires a 37.47% increase to the specific premium, which projects a total annual premium of $898,561.68
• Policy without Laser - requires a 78.01% increase to the specific premium. The annual premium would be $1,163,540.28
Once we became aware of these premium rate increases, in collaboration with Human Resources, we initiated research for other stop-loss carrier options. We received a proposal from Matrix Group Benefits, which outlines the following:
- Deductible: $50,000
- 7.78% increase in the stop loss premiums. The total projected premium for the year is $704,467.08
- A policy with a laser of $300,000.
RECOMMENDATION / SUGGESTED MOTION:
Discussion and possible direction to executive advisors or broker/consultant. No action item.
Fiscal Impact
Fiscal Impact:
N/A