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Changing carriers - Changing Lifetime Maximum


Guest dsw713
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We are changing health ins. carriers on 2/1/09. In looking at the In-Network level of benefits, under our current and proposed new plan there is an unlimited lifetime maximum. I would like to now limit that to either the same as the out of network benefit OR make both the in and out of network lifetime max something like $2m or $5m. We are a medium size company of 115 employees and we will get hammered with a single high claim. What amounts are some of you using as lifetime max?

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We are changing health ins. carriers on 2/1/09. In looking at the In-Network level of benefits, under our current and proposed new plan there is an unlimited lifetime maximum. I would like to now limit that to either the same as the out of network benefit OR make both the in and out of network lifetime max something like $2m or $5m. We are a medium size company of 115 employees and we will get hammered with a single high claim. What amounts are some of you using as lifetime max?

We just increased to $3M last year. With an excellent network with discounts we have had no one come close to this max. We also have Stop Loss insurance for a specific loss over $300K per year. This somewhat limits our exposure. I have never seen a lifetime max greater than $3 million.

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I don't know enough about the type of plan you have, so I will make some general statements for you.

1. Your comment about "we will get hammered with a single high claim" makes me believe that your plan is experience rated, to some degree. I would ask the carrier what credibility factor they will be using and at what point do the large claim write-offs begin. At 115 lives, I do not believe that the credibility factor will be high, you may only be at 25-50% credibility. Both of these would act as a hedge against the large claim impacting your experience rating.

2. The cost difference between unlimited and a fixed amount ($2 or 5 million) should be very small, say 1-2% savings. This is because very few people (statistically) will ever reach 2, let alone 5 million.

3. To go from "unlimited " to some specific dollar amount appeals to me, but what is your company philosophy towards the employee? If you are a "maternal" type, a "unlimited" amount offers a level of comfort and safety. If you have another, such as the 2 or 5, you will get some people who will question it. No matter how logical you present the idea that the chance of them reaching it is very slim, some will still be concerned.

4. At your size, the carrier may have pre-packaged plans that leave little to customization. Ask the carrier first if they have different levels.

Hope this helps.

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Guest mcapuano
We are changing health ins. carriers on 2/1/09. In looking at the In-Network level of benefits, under our current and proposed new plan there is an unlimited lifetime maximum. I would like to now limit that to either the same as the out of network benefit OR make both the in and out of network lifetime max something like $2m or $5m. We are a medium size company of 115 employees and we will get hammered with a single high claim. What amounts are some of you using as lifetime max?

Changing the lifetime maximum benefit of your group health plan heavily depends upon whether or not you have a fully-insured plan or a self-insured plan. Under a fully-insured plan, your options are most likely limited to the "boiler plate" type plan designs available from the insurance company - i.e $2M, $5M or Unlimited. Additionally, if under an unlimited lifetime maximum benefit plan you have a claimant incur a $10M claim, your paid claims experience ratio should not be any worse than if you had a claimant incur a $2M or $5M claim. The reason for this is an underwriting term called "credibility." Simply put, insurance companies incorporate specifc stop-loss threshholds on individual claims, too in that they may purchase reinsurance protection on individual claims in excess of say $100,000 or $250,000 for example to protect the "pool." So, depending upon your size (at 115 employees) your credibility threshhold may be set at 50% - meaning 50% of your paid claims in the aggregate would be charged against your renewal calculation while the other 50% would be charged against the insurance pool. In addition, individual claims in excess of a specific threshhold level are not factored into the renewal calculation. Bottom line - if you're fully-insured you need not be concerned with whether or not your plan has a lifetime limit of $1M or unlimited - the end renewal result should be the same regardless if you have a 2M claim or a $10M claim.

If you are self-insured, most specific stop-loss policies typically limit an individual claim to $1,000,000 (somethimes $2M) but, also limit the aggregate claims for the whole group at $1M. Additionally, your Summary Plan Description as well as the employee's Certificate of Coverage can be scripted to reflect a lifetime maximum benefit in accordance with the individual lifetime maximum benefit of the specific stop-loss contract.

Hope this helps.

Mark

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