According to a spokesman for the New Jersey agency, the stop-loss issue came to the state's attention after it received “reports that some writers of stop-loss coverage were selectively marketing coverage to small employers based on employee health status.” He defined small employers as those with up to 50 employees that are eligible to purchase coverage through the state's Small Employer Health Benefits Program, which was established under reforms passed in 1994. Insurers that sell health plans via New Jersey's small-employer program must cover all employers regardless of their health status, but insurers are allowed to impose waiting periods on individual plan members with pre-existing conditions, the department spokesman said. The plans also are subject to minimum coverage requirements set by the state, he added. “There are a number of stop-loss insurers that have been sniffing at that small-group market,” said Robert Melillo, national vp of risk financing solutions at USI Insurance Services L.L.C. in Meriden, Conn.
“Self-funding is definitely coming downmarket,” said Craig Hasday, president of Frenkel Benefits L.L.C. in New York.
But to price stop-loss coverage, insurers typically medically underwrite it based on information collected from past claims or, when that is not available, on medical questionnaires completed by employees, benefits experts said.
The process is similar to an employer seeking a quote from a health insurer, said Ken Olson, division president of The Horton Group Inc., a broker based in Orland Park, Ill. “If an employer wants to shop their group health insurance, they fill out the medical questions application and then a rate comes back from the competing carrier,” he said. “Why is that different than shopping for stop-loss coverage?”
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