Stop-Loss Demystified

Welcome to the Generous Benefits Podcast, where we help employers build people-first benefits that make business sense. I'm your host, Amanda Brummitt. Today, we're joined by Thomas Walaszek, a leader in the stop-loss and self-funding space. In this episode, we break down the roles of brokers, managing general underwriters, medical carriers, and stop-loss carriers, and we discuss what employers need to understand about market conditions, financial risk, and strategy as they evaluate level-funded and self-funded options.

Tom, thank you so much for being here with us today. Could you start with just telling us who you are personally, professionally, and how you found yourself in the stop-loss and self-funding space? Absolutely. I appreciate being here.

Thank you for the invite. My name is Tom Walasek, Director of Underwriting at Ryan Specialty benefits. I've been in the medical stop loss, self-funded world for 20 years now, starting low in the underwriting department and working my way up. Started at an MGU and pretty much stayed with that entire MGU my entire career.

What's an MGU? So an MGU is a managing general underwriter. Okay. And we are contracted with different carriers to write stop loss policies on their behalf.

Essentially, the middleman between the employer broker relationship and the carrier relationship. So the MGU underwrites the groups, collects premium, disperse commissions and fees and taxes and remits payments. And then we also do all of the claim adjudication, claim payout disbursements for specific and aggregate reimbursements. So it's essentially a function, an arm function of the carriers that we are contracted with.

So we use kind of three departments, an underwriting department, a claims department, and an accounting department, and then obviously sales and other kind of offshoots of that. But those are the three main functions of an MGU. And I've been on the underwriting side my entire career. In 2016, our company was acquired and rebranded into AccuRisk Solutions, which is, I think, somewhat of a more well-known name in the self-funded stop-loss world.

So 2016, fast forward to December of 2023, Acurisk was acquired, wholly acquired by Ryan Specialty, which is a publicly traded wholesale brokerage P&C conglomerate that wanted to start a health division benefits arm. So Accurisk, along with two other companies, were acquired by Ryan Specialty, and we are now the health division, Ryan Specialty Benefits, of the larger publicly traded Ryan Specialty company. And then how about you? Did I see you've got a master's in finance and a, undergrad in business?

I do. Started in business, didn't really know what I wanted to do, maybe accounting, maybe finance. So got my degree, started at the MGU. I went back to school, got my master's in finance because it really interested me.

Maybe I would make a pivot or career change. And then after that, I went and achieved my CFA-designate charter, which is a charter financial analyst, which I'm pretty proud of doing. Love that I have the acronym. more for investment professionals.

But glad that I did it. Not really fully applicable to the self-funded insurance world, but still nonetheless pretty proud of myself for doing that. Yeah, definitely. And then before we dive into all the details, will you just give us a really basic definition of what is stop loss?

Absolutely. Stop loss is a health insurance policy that is not fully self-funded, And it's not fully insured. So if you think of health insurance benefits for an employer group as a spectrum, on one end you have fully insured benefits. You...

Contract with a carrier and a network, and you pay your one premium amount every month, and you don't have to worry about anything else. Administration claims, everything's adjudicated, done usually by that one larger carrier entity or an HMO group or something along those lines. Complete opposite end of the spectrum is completely self-funded. Think of large, massive companies, Walgreens, McDonald's, publicly traded, huge companies.

They don't need to buy insurance. they need to contract with an administration to process claims and have access to a network so they'll have admin costs but they're not paying premiums for insurance coverage because they're so large it's so well developed it's so predictable they pretty much know what they're going to have to pay every year so no coverage at all stop loss is kind of in the middle where these employers are self-funded up to a certain dollar amount and then over that dollar amount for catastrophic claims, so to speak.

Insurance kicks in and covers it. So the stop loss deductible is the employer group deductible in which any member on the plan would have employer liability up to that dollar amount, and then everything over that dollar amount insurance covers. Okay, that makes sense. And when you're talking about those truly self-funded companies like the Walgreens of the world, do they even have any kind of like reinsurance product in place, or are they truly, truly, truly self-funded.

Most of them are truly self-funded. Some might have some very high-end coverage that they purchase or acquire, but when you have 20,000, 30,000, 70,000 employees, paying premium for something doesn't make sense because it's just so predictable at that point. There's going to be high claims. There's going to be catastrophic claims.

There's going to be those types of things in those levels of populations years over year. So you look at four or five, six years of claim data on populations at large, it becomes very, very predictable. So there really isn't a need. To purchase insurance especially with the revenues and the cash flows that those companies generate even you know gene cell therapies and car t's and the very high expensive costing treatments that are coming out these days still kind of fit in those populations so there may be some high level coverage but usually usually there's not okay cool i learned something new today Okay.

And then let's get into the players involved. So brokers, stop loss carriers, managing general underwriters like you. Medical carrier, you mentioned third-party administrator. If I missed anybody else, give me just sort of a rundown of who they are, how they play together, what that should look like, and particularly in a level-funded versus self-funded arrangement.

Sure. It was always easiest for me to think about in my early career is just kind of like a vertical line. And at the bottom, you have the employer group, you know, they're the one purchasing the coverage, and then they are contracted with a fiduciary broker or an agent. That broker agent may work with a general agent or a program packager that has a pre-packaged turnkey program that will work consulting with the broker, so to speak.

From there, they would either purchase coverage through a carrier directly or through an MGU like us, and then you have that carrier's paper that your policy is written upon. And then above the carrier, there's different layers of risk sharing and reinsurance and seeding out risk and all those types of things. The offshoot from that is that the M. Employer client is also contracted with a tpa third-party administrator to manage and pay all the claims a pbn network any other vendor cost containment solutions you know a mental health program a telehealth anything along those lines would be directly contracted with the with the client kind of also with the tpa because the tpa kind of has to coordinate all of these different vendors make the payments properly, make the plan function efficiently.

But that was always the easiest way for me to understand it and kind of where these different players kind of fit in the spectrum, so to speak. Yeah, I wish I'd had that on day one. That was actually really, really, really helpful. And you threw in PBM, that's Pharmacy Benefit Manager.

Yeah. I think most people know what a PBM is, but just in case. Yeah, yeah. Sorry with all the acronyms here.

Yeah, no. Definitely the norm in our industry. It is. It is an acronym-heavy industry.

And then when those relationships are in place, and I really like that vertical climb and then the people on the outside, does that change at all if it's level-funded versus self-funded? It can. It doesn't have to. You know, there's level funded prepackaged programs.

Like I said, the consultant or the general agent may kind of sell with the broker to the client. The broker may develop their own level funded program with an MGU or a carrier relationship. So it's kind of just kind of a mix mash of options available out there. Obviously you know the larger carrier national networks have their own you know level funded programs and different smaller players have their own as well level funded is more of a.

Risk management mechanism you know you have the stop loss policy and then you have a level funded policy which can be similar can be the same they can be different so it kind of gets a little gray and a little muddy but it's kind of all in the same bucket as just a different type of stop loss reinsurance funding mechanism of what's going to be best for that specific employer client. Okay, cool. And then if we're thinking about all those people collaborating, I learned this from you that if that's truly a consultative and strategic relationship instead of just cranking out renewal numbers, what does that look like?

For us and for me specifically, I've had the most success in that type of relationship. You know, getting really close with my broker partners, getting as close to the client as possible to really understand what they're trying to accomplish. Every employer client's different some can be the same but there's certainly carriers out there in relationships where it is just transactional and you know pumping out quotes and you know here's your quote let me know how we look and what we need to do to sell this you know that's how a lot of companies operate not all of them but we've always liked to kind of take a dare I say like a friendlier approach in terms of really trying to understand what it is our client, which is essentially the broker and ultimately the employer client is trying to get accomplished.

A lot of the times it's cost savings and, you know, what is, what can self-funding do for me? And we have resources, we have people at our company that, you know, we can assist with those discussions and conversations. I don't want to be spread thin, working with everybody in the country, trying to just write a group here, a group there, a policy there, a policy here. I really try to make deep relationships with the people that I work with.

You know, I want a mutually beneficial, sustainable book of business that's going to benefit me and what we need to get from our company's perspective, but also provide fair and reasonable health care insurance coverage for these brokers and what they're offering to their clients. So, you know, kind of rewinding a little bit, to the history that I talked about back in our Accurus days, you know, when we formed Accurus, we were 18 employees. So Kenny did a little bit of everything.

You know, everyone's a Swiss Army knife. You know, everyone's doing everything to make the company work. And to grow the way that we wanted to grow, that was the mindset that I had was, you know, let's kind of rethink this whole organization. How can we approach this differently than what we've done in the recent past?

And And that was one of the mindsets that I had was let's let me find these people that are. Implementing solutions doing things actually for their clients not just trying to build a book of business through the normal traditional health care ways and really ingrain myself with what they're doing now a lot had to be done before that i had to educate myself on what was out there the different solutions the different programs and how we would you know price for those things accordingly but that was the line of thought that i had and i feel like over the course of the past decade or so I've had success with that kind of mindset.

Yeah, most definitely. I mean, people want a relationship. They want a conversation. Otherwise, why do you need to exist?

It could just plug all the numbers in and send me what you've got rather than a consultative and you've got a depth of experience. So tapping into it is really a benefit. Exactly. There are a lot of companies out there and many people still treat stop loss as a commodity.

You know, So you go to 10 carriers, you put everyone on a spreadsheet, put it in front of their client and say, which one do you like? And it's usually going to be the lowest cost unless anyone else, unless any one of them offers something different or unique or value add or something along those lines. So I try to be that uniqueness, that value add benefit. You know, we have clinical consultative nurses on staff and other things that we can get into.

But, you know, there's a whole host of reasons of why those relationships matter. So my broker partners understand everything that we can offer that is available to them. That is different than those nine other carriers on that spreadsheet. Yeah.

Okay. That makes sense. And let's, yeah, let's dive into that. What are the differences in stop loss coverage?

What do employers think they know but not understand? Give us, give us the pitch on what a good stop loss carrier looks like. So it's just a matter of the pieces in place, right? You know, there's different contract basis that you have to be aware of to cover a gap in coverage.

If you're moving from fully insured, you know, what do you do for this claims lag and how do you manage those instances? Obviously, different PPO networks and different access. And we talked about different pharmacy benefit managers and how those different options out there can control costs differently. So all those pieces and players have a different you know function and a different reason of what anyone's trying to accomplish um different carriers policies just differ on wording and you know the way they're going to pay claims and the way you know from a legal perspective things are written so that's really getting into the weeds of you know having a legal analysis done of one carrier's policy compared to another carrier's policy.

And I think once brokers start working with a particular MGU or different carrier, like those are some of the things they ask in initial conversations and then it's just kind of known because our carrier's policy hasn't changed in the eight years that we've worked with them. You know, they'll file, you know, yearly with the states and get new policies and riders and all those things filed. But in terms of the general wording like that doesn't change significantly over time but some of those pitfalls that an employer wanting to get in a cell phone and needs to be aware of will certainly consult with their broker of what do we need to be aware of how do we manage these things and again a good broker is going to have answers and understandings of how to you know deal with all of those instances.

Yeah. The two that I hear of that come up that I'd love for you to address is the runout period. And then the if I as the employer deviate from my plan documents and make decisions that the stop loss coverage may actually not or I may jeopardize that coverage. So can you explain both of those?

Sure. So run out period. So stop loss policies have a contract basis. 12-12, 12-18, 18-12, 15-12.

And those two numbers are incurred and paid. So the number of months that a claim is incurred in. And then the number of months that a claim would be able to be paid in covered under the policy. So a runout is anything 12-15, 12-18, 12-24, 12-36, all claims incurred with the 12-month policy period, but then paid within those 15 or 18 or 24-month time periods.

So it covers a gap when you're rolling over one policy period into the next. So, easy example, January 1st policy, somebody goes into the hospital on December 30th. That claim is not going to get administered and EOB'd and billed from the hospital to the TPA in one day. It's not going to get to the TPA in December 30th.

There's a claims lag, right? There's just the hospital lag that's inherent in the industry. So that run-out period allows time period for that claim to be processed, for the TPA to receive it, adjudicate it, pay it properly, and then if there is a reimbursement on the stop-loss policy, allows them also time to file that with the carrier and then get paid within the appropriate time period. So when you're rolling over one policy, you know, 2025 policy to 2026, that runout period would cover any gap in coverage from the claims lag inherent in the provider industry.

So in theory, that should cover any gap, any claim that could fall within that gap not being covered by your insurance policy and you're kind of fully protected and not have to worry about that. The other question about planned document wording... Differing from the reinsurance policy. So all of our policies mirror the plan doc wording.

So we don't have a separate issuance of what we cover compared to how the plan doc reads, which I think is a vital question to ask when you're selecting a reinsurance carrier or a stop loss policy. Some carriers don't, and that, again, could issue a gap in coverage if you think you have IVF covered, but the stop-loss carrier just inherently has a no-coverage rule on their policy of IVF, there's an issue there. You know, you think you have something covered, something's not going to be covered by your carrier, there's a complete gap there.

So that plan mirroring is a huge piece that brokers and clients should be aware of and should ask their carrier before they move forward with them. If something happens outside of their plan doc and the employer wants to pay it, they certainly can. They can pay it. They can pay whatever they want.

It's their policy. It's their employer-sponsored, self-funded plan. They're buying a reinsurance policy from the stop-loss market. So if they decide to pay something outside of their SPD guidelines.

They could ask the carrier to cover it as an exception. Carrier can review, say yes or no. You know, our policy mirrors the plan doc. We're not covering this because it's not there.

Or they just could not even ask and just elect to pay it themselves out of whatever cash flow that they have depending on the carrier relationship with the broker and depending on you know book of business and all those types of things it's obviously carrier discretion to allow that or not um but those would be that's essentially kind of the instance of how that would happen um if If something were to fall outside the policy or fall outside the SPD guidelines. Okay. So on both, if you deviate, you risk being on the hook financially for it because you're so good at this.

Yeah, absolutely. You need to be aware of those things. And again, just processes of how to manage that if something odd were to come up and, you know, there's, ways to kind of collectively come up with, you know, decisions that make everybody happy also. And then does that apply?

Obviously, it applies to self-funded. Does it apply on level-funded plans at all? Like that runout period? Yes, because level-funded plans are technically supposed to cover all of those gaps where nothing is going to fall outside your guideline or your, you know, what you think you have covered.

So level funded when it first kind of came about it's really a mechanism of self-funding that's supposed to mimic a kind of turnkey fully insured program right so the broker packages everything together in all one monthly cost amount you know the stop loss premium the claim fund factors the admin costs the tpa costs access fee any other fees associated with the policy in general gets It's all lumped into one amount for, you know, employee coverage, employee spouse coverage, child cover, family coverage, and here's your fully insured equivalent premium rates.

All you have to do is pay this every month based upon your enrollment, and you don't have to worry about anything else. That's the theory behind level funded where it's you are self-funded but it's going to look and feel like a fully insured type of plan because that's what smaller clients are used to seeing and used to having to deal with from a finance perspective a cash flow perspective an hr perspective all those different pieces that come into play with a with a health plan and oh by the way potentially if you run very good the carrier doesn't just keep your money you have the potential for savings at year's end, which gets into the claim fund conversation and, you know, kind of how that piece of the level funded policy could benefit them in the long run.

Okay, thank you for that explanation. Super helpful. And then as people are looking at their renewals, who should they be talking to? What should they be asking?

Do they talk to their broker? Do they talk to their MGU? Do they talk directly to their stop loss carrier? What kind of reports should they ask for?

And how much transparency should there be? Yeah, so it would be odd for employers to talk directly with an MGU or a carrier because it's usually through a broker, through an agent, through the TPA in some capacity. I think in my 20-year career, I've talked to an employer client twice. Does that mean something had gone wrong?

Um one of them just wanted our hear from my mouth of why we price something a certain way and why they thought it was too low and i kind of needed to justify myself and the other one was more along the lines of what are solutions that we can put in place that the carrier directly has seen generate savings so they didn't want to just hear it from their broker they wanted to hear it from me okay so what you're hearing is if you trust your broker just talking to your broker should be good.

Usually, yes, because they should have all the answers. They should have bring the options to the table. You know, getting back to your question, what should they be at? What should employer client be asking?

They should be asking what's out there, what's new. You know, if we're a small group and I've seen the same five options from the same five different carriers the past four or five years, what else is out there? What can we do to manage this? You know, if it's a very healthy, clean, performing client, those are the best times to look at what else is out there.

Because if you're clean and healthy, maybe other things can be put in place to manage that even further. Everyone wants to look at other options when they're getting the 25, 30, 40, 50% rate increases from their fully insured carrier. And that's not the most ideal time to see what else is out there because the alternate option carriers are going to see the same things that went wrong or went unhealthy with that group that the incumbent has seen. So when a group is running healthy and is getting favorable increases year over year, those are the best times to see what else is out there and what else can we do to manage this even better.

Save even more money on our health plan rather than take this 5% increase, which appears very good year over year. And every employer client is different. You know, you have a, you know, manufacturing firm and a bunch of people on an assembly line, you know, that may have one need compared to a company that's more rural and spread out and work from home and have to drive 30 to 50 minutes to get to an urgent care. Maybe, you know, a telehealth plan with an incentive to use that is going to be received very favorably compared to them having to drive to the urgent care.

So depending on what the client is and what needs could be for that client, the broker should have those solutions kind of in their bag of tricks, so to speak, of different options to offer. Not every group's going to need the same things, but every group could need something different, and a broker should have different options and solutions to bring to the table. Yeah, I love that you brought that up because people consistently just, just give me the rates, just give me the rates.

And we can throw out rates all day long, but to your exact point, until you know the individual needs of the different employees and their population, you don't know what they need rates on. And so, yeah, that's a really good example that I may borrow, Tom. And I will credit you with. Part of the problem is the fully insured market is not transparent.

They don't release data. They don't release detailed data. So you don't know what's wrong. You just take your 5% increase and think everything's good and well until one of your members has an issue and is in the hospital for a month.

And then you get that 30% increase next year. Well, if the data was there and, you know, people are getting labs drawn and there's, you know, markers being tracked, you could may have prevented that heart attack with a program for that person or a select group of people in your population. If you have a high diabetic population there's programs in place to get people engaged and really manage their issues with insulin and you know the different things available to kind of control those types of things instead of thinking and hoping they're going to do it and then three four years from now you have a you know a population that's really sick and going to the er every other month or the urgent care every month when that could have been mitigated two years ago with the proper planning in place.

So moving to self-funded isn't just about saving costs because it's cheaper. It's not cheaper, it's just a different funding mechanism. But then the control that an employer has around it, because it is their plan, it's their policy, they can put these different things in place, get the data year over year to kind of continually manage those types of things, and then really understand what is driving the costs and what can we do different next year to manage that part of it. So whole different, you know, menu of options out there to kind of do what is needed for the different types of clients and what their population requires.

Yeah. Do I recall you telling me that you guys have a like a nurse navigator program? So we don't have a navigator program per se. We have a clinical advisory team.

So we have, when we were Accurisk, we purchased a case management firm for a few different reasons. And then we purchased an MGU that had a very specific, very hands-on approach from the clinician perspective. So we'll review file feeds and we'll review 50% notifications and large dollar notifications that hit our system. And then our nurses will kind of review those files, review those case management notes, and we will offer options and solutions to our broker partners of ways to manage high catastrophic claimant situations.

Just for an example, one that I dealt with last week, we had a client. I don't remember the exact diagnosis or the issue, but they needed to get infusions and the infusions were costing $46,000 every three weeks. I believe it. Our clinical advisory team had a solution that if they went to this one vendor and had a nurse come to their house, administer the drug to them in their home rather than going into the hospital, through this program, it was going to cost $21,000 every time it happened.

And, you know, still a substantial claim if that's you're still paying 21 grand every three weeks. But, you know, that was $450,000, $500,000 of savings over the course of a year if they just, instead of driving to this facility, had a nurse come to their house under this program and get this done. Different things with pharmacies and prescriptions and, you know, 340B programs, you know, they will offer a whole host of options and solutions. And again, it's we'll offer this, we'll help provide options and ways to manage your program.

They don't have to take it. They don't have to do it. It's going to impact the client. It's going to impact the renewal.

It's going to impact that group. But we just feel, again, kind of being closer to the client, understanding what's needed. Getting all that data sooner and being able to help manage the plan with the TPA, with the client, is better for us rather than just being a silent carrier in the background of writing a policy and just waiting nine months to work on the rental. That's not how we would want to approach it.

Yeah, you're truly a resource. Absolutely. Okay, let's shift gears. You had told me that we haven't had a hard insurance market in roughly 20 years, which full ignorance here.

I was like, what? The rates look terrible. What are you talking about, Tom? So can you explain what a hard market is, how that affects stop loss, and mostly what that's going to mean for us over the next two to three years?

Sure. So a hardening or a tightening market. Sure. Really means that there's less carrier capacity, less options out there, rising renewal rates, less availability for employer clients.

Fully insured rates are going up. You know, individual policy rates are going up due to things going on in Washington, which is probably three other podcasts in and of itself. The end of the right version. Yeah.

Costs are rising. and the stop-loss world is not immune to that either. Loss ratios increase. What happens when loss ratios increase and it becomes unsustainable for carriers?

Rates increase. So it's not only a general increasing of rates, but it's also a pulling back on features and functions of what is available to clients. So there's different things available within a stop-loss policy, you know, an experience refund feature that if you run profitable, you get a portion of your premium back. You know, these aren't being offered as generously as they were in the past.

A no new laser feature with a rate cap or a pricing cap on policies, you know, those aren't being offered as generously in the past. So certain groups of a certain size should be a, you know, a certain specific deductible level, like we talked about earlier, you know, the employer pays up to a certain dollar amount and everything over that dollar amount our reinsurance policy covers. Well, if you don't. Increase that year over year with medical trend increases after four or five years, you're going to be way under the threshold of where you should be on your specific deductible level.

So carriers aren't offering that level that a client has been at for five years and only offering where they think the client should be based upon their size and history and those types of things. So carriers are just looking at all these different things in different ways and kind of adjusting rates, adjusting offerings, adjusting what's available to these employer clients, given everything else that's kind of happening in the market, and medical trend prices and new therapies and new treatments and all the things getting approved from the FDA just need to be managed as best they can with how the carriers kind of, what the carriers have to offer in terms of their policy and their features and all those types of things.

So you're saying buckle up. In addition to rates continuing to increase, we may have less options as well? Yes, potentially. I mean, we saw that this kind of January 1-126 cycle.

A lot of groups kind of having a little bit of shell shock of, you know, we usually get our renewal in August and we sign on the dotted line on September 1st and we don't have to worry about it. A lot of that didn't happen this past season because of the pullback from carriers, because of the rate increases being offered. So groups and decisions were being delayed. And then, well, we don't like this.

Take this group to market and let's get another group. Option to see what else is out there. So more groups went off to market, more opportunities became available to us as an MGU carrier just because some of those early decisions and early things that usually were done in the past certainly weren't done this past cycle. And we think that that's going to continue for the next certainly 12, 18, maybe 24 months.

Wow. Okay. And you've been in the industry long enough that this will be your second time around on the hard market? My second time around, normally it's a seven to 10 year cycle, but we've been in what you would call a soft market for close to 18, 20 years now.

So kind of definitely a little bit longer of a soft cycle than what the historical norm is. So I kind of came in on the tail end of it earlier in my career and um it's, finally coming back around. And we will weather it again. Absolutely.

So if we've got employers listening today that are considering self-funding for the first time, what foundational questions should they be asking both of potential partners, but also of whether or not they're ready? Company size, claims data, risk tolerance? Yeah, the basics, what you just said, are required, right? is a company our size ideal for self-funded?

Can we do it? What does it entail? What would be different than what we're doing today? Just a really basic understanding of how they would need to operate in that environment compared to what they have been doing.

And then once they understand what's required of them and the different departments within their company, then you kind of go a step further. You know, we've talked about level funded policies or just true traditional stopwatch spec and ag policies, you know, and then you start talking about the different players and pieces in place and contracts and networks and administration and how do we manage this and understand this, you know, going into it for the first time. What we've always thought and what we've always said is moving from the fully insured world into the self-funded world shouldn't be a one-year experience.

It should be really a three- to five-year plan for a company? And what do they need to do over that time period to really fundamentally understand how they're going to be where they want to go after that. And what I mean when I say by that is any group can have a bad year. You know, they could move self-funded.

There could be some issues. There could be health issues. The group could just have a bad year from a health perspective. And if they get a large increase or larger than what they would have expected increase, they think it's horrible.

They don't think it's for them. They're going to go back into the fully insured world and not realize what benefits other than just price stability self-funding can offer them. When you're in a three to five year kind of plan moving into self-funded, over the course of time, statistics show that they are going to win, meaning they're going to more likely than not save money in a self-funded plan compared to the fully insured environment the longer they stay self-funded. Because there is that claim fund piece that clients have to pay and fund.

They have to pay all the dollars under that spec deductible. And the carriers set an annual amount of what we think that's going to be. It's called an attachment point. And if the client comes in under that amount, they keep all of that savings.

So there's the potential, not only just on a max cost comparison basis of what is our worst case scenario, is self-funding going to save me money, which really isn't the proper way to look at self-funding compared to fully insured, but a lot of clients do just in case worst case happens, right? But over the course of time, they're going to win. They're going to save on that claim funding portion. How much?

That's anyone's guess, obviously, with what happens and, you know, what you do to manage those costs. But the longer they stay self-funded, the probability of them skyrockets in terms of winning or saving compared to remaining in a fully insured environment over the course of that same time period. Yeah, most definitely. And for our first time self-funding people, you mentioned spec and ag.

Can you define those really quick? Oh, sure. I think I know the answer, but I don't want to mess it up. So the stop loss policy has two pieces to it.

There's a specific contract and there's an aggregate contract. The specific is everything over that catastrophic amount that we talked about before. So employer funds everything up to a certain dollar amount. Everything over that dollar amount is reinsured and funded by the reinsurance, our policy.

The aggregate policy is everything under that amount. So all of the lower dollar claims accumulate for every member under the aggregate piece of the policy. And we as the carriers analyze all of that, underwrite it, and we'll set an annual attachment point for all numbers, for all claim dollars that we think the client is a max cost for the client. And there's a low premium dollar cost to purchase aggregate coverage.

So client funds all these dollars. If they don't get anywhere close to the maximum, the difference is the savings that they get to retain at the end of the year. And then you shared so much already, but if you had one last piece of advice that you'd give every employee, every employer, every human resources leader that's evaluating their funding strategy, what would it be? I would say absolutely look at self-funded, even if they don't.

Make the leap. You know, if you are having cash flow issues, if you're upset with the U.S. Health care, fully insured hamster wheel, if you're getting 25% increases only to say, if we don't shop this, we'll bring you down to 15.

And you think that your broker is doing a good job for you with that strategy. There's other options out there. There's other solutions. There's ways to manage your plan and control costs to not have those 15, 20, 30% increases year over year.

Is it going to be the same as just a turn-free, fully insured approach? No, it's not going to be the same. There's going to be requirements. There's going to be engagement.

There's going to be education. People are going to have to do things differently. But if you want to manage the plan, manage costs, have something different available to you, there are a multitude of options out there today, more than ever, of different things that you could look into, different options, different types of policies, different ways to manage the plan other than just being shown a spreadsheet from the five large national carrier networks every year and getting between a 12 and 20 percent rate increase.

I would suggest look into it, ask your broker the questions, ask what they know. Is it feasible? What would we need to do to prep for this? Even if it's a two-year strategy before you even make the leap, just understand what is out there and what any one employer client can do to have better outcomes with their employer-sponsored plan.

Yeah, for sure. And I would add that that's a great thing to do during that kind of mid-year review when you don't have a big decision on the table and you've got time to dream what it may look like two years down the road. Right. Absolutely.

It's great advice. Yeah. Well, Tom, thank you so much. You've made a really, really complicated topic, at least complicated for me, much less complicated, easier to understand and really put it in language that actually finally makes sense.

So thank you. Well, I appreciate that. And thank you for having me again. Big thanks to Thomas Wallasek for helping us demystify stop loss coverage, self-funding, and what a shifting insurance market could mean for employers.

This is the Generous Benefits Podcast, where we keep it practical, personal, and people first.