Self-funded employers that use a group captive for primary stop-loss coverage also can avoid “lasering,” a practice in which insurers set higher attachment points for certain plan members with costly pre-existing conditions.
“Small employers tend to find that self-funding is more of a risk because of the lasers,” said Kenneth R. Olson, president of Horton Benefit Solutions in Chicago. “They can be absolutely devastating for businesses' financial statements. So we've tried to craft the captive concept to provide reinsurance net of stop-loss.”
For example, if 10 companies each with 50 to 500 employees form a group captive to provide stop-loss coverage at attachment points up to $500,000, they most likely never will feel the impact of a laser, Mr. Olson said.
“Most lasers come in about $100,000 to $200,000. We almost never hear of a laser above $500,000,” he said.
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