Contract quality—inclusive vs. exclusive

Author: Sean Cooley, Symetra Regional Group Manager

Are your clients exposed to coverage gaps between their plan document (from which the administrator determines claim eligibility) and the stop loss policy?

Many top-tier carriers have inclusive contracts designed to eliminate these gaps. Typically, these contracts are not the lowest cost, and we tend to see a correlation between contract strength and industry tenure. In contrast, exclusive contracts can contain 18 or 20 exclusions or limitations. These contracts are designed to mitigate liability and allow the carrier to deny a claim reimbursement. It's no surprise to see these carriers lead with low pricing.

With the significant growth in the stop loss market—an industry estimated to be $14 billion to $17 billion annually1—we are seeing some new carriers enter the marketplace. Without significant blocks of business capable of absorbing surges in large claim incidence and severity, it’s not uncommon to see new-to-market carriers file their contracts with several "gotchas."


Avoid falling into a gap situation:


  • Does the contract include an exclusion for claims in excess of "usual and customary?"
  • Does the contract have an actively-at-work requirement? If so, employees who are on disability or other types of leave at contract inception may not be covered under the stop loss policy.
  • Does the contract define "medical necessity" or "medically necessary?" If so, claims may be denied if the carrier deems them not medically necessary. How the carrier defines medical necessity is critical in determining gap potential.
  • Is the plan document used to determine whether expenses are eligible for reimbursement? This is often referred to as "mirroring" the plan document and may be offered as a "mirroring endorsement."
  • Does the contract exclude expenses associated with medical tourism?
  • Does the contract exclude medical review and case management fees?
  • Does the contract exclude or limit claim reimbursements in the event the administrator loses a PPO discount or other discount?

Consultants who have witnessed a claim denial (when the employer ends up holding the bag) can spot exclusionary contract language and recommend carriers that eliminate gaps for their clients. Be sure to ask these questions to avoid gaps in your clients’ coverage.

In our next post, we’ll discuss why cash flow is king!