Standard Stop Loss Disclosure Form

The Employer Disclosure required by most stop loss carriers and MGUs has grown in sophistication and use. Today, most stop loss sources require an employer disclosure before a new or renewal quote is offered. Ideally, the Employer Disclosure lists all known high cost claims, claims that have exceed a given dollar threshold, or patient/employees with certain diagnoses. Failure to disclose these individuals can later lead to claim denials.

Boards of both the Self-Insurance Institute of American (www.SIIA.org) and Society of Professional Benefits Administrators (www.spbatpa.org) have endorsed the Employer Disclosure and its accompanying codes set. The goal of the Standard Disclosure Form is to improve the accuracy and timeliness of disclosure and reporting of claims for partially self-funded health benefit programs.

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"It is the intention that the implementation and use of these guidelines will create standards of practice across the industry, both for insurers/MGUs/reinsurers (carriers) and TPAs," says Francis Fey, President and CEO, JI Companies, Austin, TX, a TPA member of the Industry Study Group."

"The purpose of the "White Paper" is to articulate the need, rationale and proposed solution. It is also to describe how carriers and TPAs can operationalize this new standard effectively," says John Lord, Vice President, Zurich Specialty Health, a stop loss carrier member of the Industry Study Group. Lord also serves as Vice President of the SIIA Benefits Committee.

Self-Funded Community Votes 86% in Favor of Standard Adoption

In Spring 2005, members of the self-funded community were requested to review the proposed Standard Form for Stop-Loss Claim Disclosure at the request of The Self-Insurance Institute of America (SIIA). There were 112 responses which were studied by SIIA Benefits Committee Chairman John Lord.

Survey Highlights

Respondents	Yes Adopt the Standard	No Do not adopt the Standard
Overall	86% 62% recommended adoption "as is" with no changes 10% recommended adoption with "comments" 14% recommended adoption with "changes"	14%
Self-Funded organization	100%	0%
TPA	93%	7%
Insurer	83%	17%
MGU	71%	29%
Reinsurer	75%	25%
Other*	83%	17%
*Consultant, PPO, Broker, Audit Firm, Software vendor

Conclusions

Clearly, the self-funded employer and the vast majority of TPAs want a standard form for stop loss claim disclosures. MGUs and reinsurers favor adoption in the majority, but a lesser percentage. MGUs, in particular, often feel their strength is in unique approaches to analysis and underwriting. Having unique questions or requirements on the stop loss disclosure form may be required by the MGU. Therefore, it is not surprising, the MGU adoption rate is the lowest of the groups responding. Nevertheless, 71% of MGUs favor adoption.

Because submitted stop loss claims (after the stop loss contract is in force) are sometimes rejected based on information contained on the stop loss disclosure form, self-funded employers and TPAs want to "get it right". Having a single standard form is easier to complete and less susceptible to error. Information Technology staffs will have an easier task programming and reporting using a single standard instead of attempting to supply different answers to a myriad of forms.

An insurance industry analogy that supports adoption of the Standard Form for Stop Loss Claim Disclosure would be Acord. In 1970, Acord, the organization of insurance carriers, agencies, brokers and other associated companies was started to help the insurance industry standardize its forms. Because of its success and wide acceptance, Acord then expanded to include software companies that develop applications for insurance providers.

Employer Disclosure Requirement Prevalence

At the SIIA National Conference in September 2004 (Miami), David Ives, CEO of NiiS (www.NiiS.com), presented results of a 2003 survey of 34 stop loss (15 MGU/Carriers, 13 Direct Insurers, 6 ASO (Administrative Services Only) Carriers).

Survey Findings

12% (4) had no disclosure requirements

Required Disclosures

82% (28) required disclosures of claims exceeding 50% of specific deductible
59% (20) required disclosures of disabled persons
44% (15) required disclosures of hospital confinements
35% (12) required disclosures of "anticipated or likely large" claims
32% (11) required disclosures of specific diagnoses (sometimes called, "trigger" diagnoses)
15% (5) required disclosures of claims exceeding a dollar amount threshold (e.g. $25,000)

Sources of Information Required

50% (17) required claim reports be checked as a source of information
32% (11) required pre-cert reports be checked as a source of information
21% (7) required case management records be checked as a source of information
18% (6) required sick leave/attendance records be checked as a source of information

Projected Adoption Rate

While comments from stop loss sources (MGUs and stop loss carriers) indicate a rapid adoption of the standardized Employer Disclosure form, each individual stop loss source will study the form, file the form with state's department of insurance (where appropriate), and possibly adjust the form for unique requirements.

About the Industry Study Group

The Industry Study Group is a group of TPAs, stop carriers and MGUs that have been meeting since the early 1990s. One of the purposes is to discuss and propose solutions to industry challenges. The industry-accepted TPA Questionnaire was an original work product of the Industry Study Group.