Stop Loss Insurance: A Key Tool in International Captive Programmes, says Generali Director
TL/DR –
Medical stop loss insurance can help self-insured employers in the US deal with the high costs of unexpected medical claims, according to Andrea Valacchi, director EMEA at Generali Employee Benefits. By putting a cap on financial exposure to catastrophic individual claims, it allows these employers to offer comprehensive healthcare benefits while maintaining budget stability. Integrating this insurance into an international captive programme could enhance risk management, optimise costs, offer greater flexibility and align with broader financial objectives – such as environmental, social, and governance initiatives.
Andrea Valacchi on Medical Stop Loss Insurance in International Captive Programmes
Medical stop loss insurance plays a key role in managing financial risks associated with unpredictable and high-cost healthcare claims in the US as observed by Andrea Valacchi, director EMEA at Generali Employee Benefits. A recent case of a premature baby with heart complications cost $10 million, highlighting the need for robust risk management solutions for self-insured employers in the US.
Medical stop loss insurance caps financial exposure to catastrophic individual claims, helping employers maintain budget stability while offering comprehensive healthcare benefits. For multinational organisations, it offers greater flexibility, optimises costs, and enhances risk management when integrated into an international captive programme.
The Role and Purpose of Medical Stop Loss Insurance
Self-insured employers in the US fund their employees’ medical expenses directly. Although this gives them more control, it also exposes them to the risk of unpredictable and high-cost claims. Medical stop loss insurance mitigates these risks, ensuring such claims do not disrupt budgets. It operates at two levels, with specific stop loss limiting costs from individual employees, and aggregate stop loss capping total claims.
Challenges in the US Healthcare System
The US healthcare system presents unique challenges that make medical stop loss coverage indispensable for employers. Rising costs due to advanced medical technologies, specialty drugs, and chronic diseases increase financial exposure. Additionally, navigating the complex regulatory environment, characterized by varying state and federal healthcare laws, adds layers of difficulty for organisations operating across multiple jurisdictions.
The Strategic Risk Management Tool: Captive Insurance
Captive insurance is an alternative risk management strategy, allowing organisations to create their own insurance entity. It centralises risk management, provides tailored coverage, and improves cost efficiency, including healthcare risk management. International captive programmes with integrated medical stop loss insurance offer several benefits such as retaining underwriting profits, offering customisation of coverage and detailed claims data for proactive risk management.
Benefits of Combining Medical Stop Loss Insurance and Captives
Combining medical stop loss insurance with captives offers cost efficiencies, customisation of liability caps, and improved risk management. Captives enable organisations to identify trends, predict high-cost claims, implement preventive measures, and reduce volatility associated with large claims. They also offer portfolio diversification by pooling different types of risks. The strategy is particularly appealing for multinational companies seeking sustainable growth in a volatile healthcare landscape.
Implementation Considerations
To incorporate medical stop loss insurance into a captive programme, organisations need to conduct actuarial analyses, choose a suitable domicile with suitable regulatory and tax environments, manage healthcare claims effectively, align objectives with stakeholders, and ensure compliance in each jurisdiction.
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