ACA mandates contributed to increase in medical stop loss coverage, insurer finds

An increase in the use of medical stop loss captives by companies that self-fund their employee health insurance plans is in part due to mandates in the Patient Protection and Affordable Care Act (ACA), such as unlimited lifetime benefit maximums. That’s according to a white paper issued by QBE North America, an operating division of global insurer QBE Insurance Group.

The white paper, “Medical Stop Loss Captives: Issues and Answers,” attributes the recent growth to several factors, including the following:

 Large companies that did not need to pair medical stop loss with their self-funded plans now find the coverage necessary due to rising health care costs.

 Large companies that already had a self-funded plan and medical stop loss coverage are looking for more efficient methods to finance that coverage.

 An increasing number of medium and small-sized companies are converting to self-funded plans to manage the cost of complying with the ACA. As they do, they need medical stop loss coverage, and insurers are developing new group captive structures in response.

Captive participation in an excess coverage (medical stop loss) that supports a self-funded plan can amplify the benefits derived from self-funding alone. A captive can also efficiently absorb some of the risks often excluded by traditional medical stop loss policies, such as certain individuals with large, ongoing medical conditions.

“We’ve seen interest for these types of plans double over the last few years,” said Phillip Giles, Vice President of Sales and Marketing for QBE North America’s Accident & Health business. “There is a great opportunity for large companies that already have a captive established for their casualty lines to add medical stop loss as a way to augment the utility of the existing captive and provide a short-tail profitability hedge to longer tail coverages.”

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