For many employers, self-funding their group’s medical plan makes financial sense—especially when backed with stop loss coverage that protects the plan from excessive losses. Stop loss coverage reimburses the plan when high-cost claims—such as those caused by cancer, heart disease and other catastrophic conditions—exceed a designated amount. The cost of coverage is determined by several factors, but one that’s frequently misunderstood is an option known as “lasering.”
What is lasering?
Lasering is a common stop loss practice in which an individual participant—based on prior claims experience or known conditions—is covered by the stop loss policy at a higher Specific deductible than the rest of the group. As a result, the employer takes on additional claim risk for the individual in exchange for lower annual premium across the entire plan.
3 reasons to consider lasering:
- Long-term savings: Using lasers to manage anticipated high-cost claims for individual participants helps keep premium costs for the entire plan in check. And mitigating the cost of the current year’s premium sets a lower starting point for any future rate increases, allowing the group to realize long-term savings.
- Opportunities for cost-containment solutions: When a single member or multiple members with similar conditions/diagnoses are projected to incur significant claims costs, employers can work with their administrator to implement cost-savings options for the overall plan.
- Potential cost savings for participants: Adjusting stop loss coverage for individuals rather than raising rates across the entire group helps reduce overall expenses for the plan. If the group’s medical benefits include premium cost-share, these savings can then be passed on to plan participants, thereby reducing their contribution requirements.
Choosing when to laser
While many carriers offer policies guaranteeing no new lasers will be mandated at renewal, there is nearly always an option to set a laser (or multiple lasers) at policy inception to account for known or projected individual participant risk in excess of the group level deductible. Another cost savings tactic is to offer—rather than mandate—the laser option at renewal.
To learn more about lasering including cost-savings examples, check out our Inside Track paper.