Drug Stop Loss Pooling Protecting renewal rates - 24.10.2011

Insurance companies determine the premium that a group plan will pay at the time of renewal based on “experience ratings”. Depending on the size of the group and the type of the plan, it might only take a single claim for an expensive breakthrough drug to throw those experience ratings out of whack and put the group’s renewal premiums out of reach.

It is important to consider that some new therapies can cost in excess of $20,000 per year, per patient. Depending on the illness, those costs can be ongoing for several years. Even with the savings achieved through lower absenteeism, higher productivity and fewer hospital stays, the impact on the drug plan’s experience could result in significant health premium increases at renewal time. Drug Stop Loss Pooling helps protect groups by reducing the likelihood of such a scenario. That is why Meldrum Horne & Associates negotiates Stop Loss Pooling into our clients’ benefit programs.

When a plan that’s eligible for Drug Stop Loss Pooling renews, only a predetermined amount of drug claims are taken into consideration when calculating the new premium. For example, annual drug claim amounts of more than $10,000 submitted for a plan member, a plan member’s spouse or all a member’s dependants, are excluded from renewal rate calculations. Instead, the plan sponsor pays a pooling charge.

The development of innovative and expensive new medical treatments and therapies, and increased demand for those services, go hand-in-hand. For those groups that are eligible, the concept offers sponsors peace of mind.

Drug Stop Loss Pooling ensures that sponsors can provide a drug plan that meets the needs of plan members while ensuring that a serious illness will not cause a dramatic and potentially unaffordable rate increase.