Compare reinsurance companies. Make sure your third-party administrator is working with well-regarded reinsurance providers, because spending on stop-loss coverage can run between 8 and 15 percent of total costs, says Helmut Braun, COO in the Lexington, Kentucky, office of UMR, a unit of UnitedHealth Group.
James L. Rivetts, president of JLR & Associates in North Bend, Washington, says he shops for stop-loss coverage every year on clients’ behalf. He recently priced stop-loss coverage for a 300-employee company and found that the prices from six companies had a roughly $50,000 spread from highest to lowest.
Consider assuming more risk. Rivetts says he also helped his client reduce fixed costs by $30,000 a year by increasing the stop-loss amount per individual to $55,000 from $50,000. Taking on that additional $5,000 of risk per man, woman and child is a gamble, Rivetts admitted, but a worthwhile one because the company would lose money only if it incurred six claims above $50,000 and below $55,000. In the time the company has been Rivetts’ client (roughly six to seven years), it never has had six claims exceeding $50,000, and it doesn’t have any claims that look like they will exceed $55,000, he says.
Switch providers. In several years of doing business with a local TPA, a West Coast refinery that asked not to be identified never received a dime from pharmaceutical manufacturer rebates. When the employer decided to switch to a different pharmacy benefit manager, the TPA claimed it couldn’t handle another provider.
“I was ready to take my business away from them if they didn’t allow me to switch PBMs,” the refinery’s human resources manager says. But she eventually persuaded the TPA to work with her chosen PBM—one she says has a very transparent policy for sharing drugmaker rebates. “It’s my money they are spending to pay bills,” she says. “[TPAs] don’t want to lose your business, so they’re going to talk to you.”