TO: The Honorable Board of County Commissioners
THROUGH: John A. Titkanich, Jr., County Administrator
FROM: Suzanne M. Boyll, Director of Human Resources
DATE: July 28, 2025
SUBJECT: Approval County's Stop Loss Policy Renewal with Highmark FY25/26
__________________________________________________________________
BACKGROUND
The County is self-insured in its Group Health Insurance Program and carries a policy that reimburses the County for claims that exceed a specific limit. This type of policy is called a stop loss policy, excess loss policy, or reinsurance policy. The County’s current stop loss policy is with Highmark and has an individual stop loss deductible of $300,000 for individual claims and an aggregating specific stop loss deductible of $100,000. The County also carries aggregate stop loss coverage for the entire medical/pharmacy plan as a whole. Below is an explanation of individual stop loss, aggregating specific stop loss deductible, and aggregated stop loss coverages.
• Individual Stop Loss Specific Deductible (ISL) - IRC’s liability on each individual on the plan (currently ISL is $300k)
• Aggregating Specific Deductible (ASD) - For any ISL claims in excess of $300k, IRC takes the liability for an additional $100k in claims. This can either be satisfied by one member in excess of $300k, or multiple members. The purpose of an aggregating specific deductible is to lower premiums paid to the stop-loss carrier in exchange for the plan sponsor potentially paying a bit more in claims throughout the policy period.
• Aggregated Stop Loss (ASL) - ASL protects the plan from unexpected, catastrophically high claims that exceed the limits of potential reserves. The aggregate stop loss coverage provides a $1M policy to IRC in the event the claims paid in the plan year exceeded 125% of expected claims.
The current annual premium for the stop loss policy with Highmark is $1,084,465 with a total fixed cost liability of $1,184,465 inclusive of the aggregating specific deductible of $100K. The monthly premium is based on a per employee per month (PEPM) rate of $52.42 per 1,724 lives. The actual monthly premium amount fluctuates based on monthly enrollment in the health plan.
Each year, Lockton markets our stop loss policy to obtain the most competitive rates. Lockton sent a request for proposal to 11 carriers with our current carrier, Highmark (HM), providing a firm proposal and 3 carriers providing illustrative proposals. 7 carriers have declined to quote.
Attached is the FY25-26 Stop Loss Marketing Analysis for an October 1, 2025 effective date. This package includes the benchmarking information, Monte Carlo Modeler, and pricing grid comparison.
The renewal proposal from HM was initially a 15.0% premium increase as noted on page 13 of the marketing analysis. Following negotiation by Lockton, HM provided a firm renewal quote reflecting an 8.1% increase in PEPM premium at $56.67 PEPM or $1,172,389 per 1,724 lives with a total fixed cost liability of $1,272,389 inclusive of the aggregating specific deductible of $100K. This is a total annual increase of $87,924. Options to increase the individual specific deductible from $300K to $325K or $350K are also provided at a reduced premium. However, Lockton’s analysis does not support reducing the individual specific deductible.
ANALYSIS
HM’s firm renewal is below market trend (15.0-18.0%), provides a strong contract, no laser liability, renewal protection for 2026, no stop loss carve-out fee, and immediate reimbursements for claims over the deductible via bill credit.
Both Lockton benchmark data and Monte Carlo analysis support that the current specific deductible is appropriately positioned. The largest cohort of peers (35.6%) has a deductible between $251K and $350K (refer to page 14), and the Monte Carlo model projects the most favorable financial outcome-defined as a 'win'-for the $300K option 75.4% of the time, based on retained claims and stop loss premium analysis.
Additional information is provided in the FY25-26 Stop Loss Marketing Analysis.
BUDGETARY IMPACT
Sufficient funding, in the amount of $1,172,389, for the annual stop loss insurance premiums is budgeted in the Fiscal Year 2025/2026 budget in the Employee Health Insurance Fund/Stop Loss Fees account, number 50412719-034589.
|
Account Description |
Account Number |
Amount |
|
Employee Health Insurance Fund/Stop Loss Fees |
50412719-034589 |
$1,172,389 |
PREVIOUS BOARD ACTIONS
Approved stop loss coverage with HighMark in August 2024 for FY24/25.
POTENTIAL FUTURE BOARD ACTIONS
Annual Renewals
STRATEGIC PLAN ALIGNMENT
Governance
OTHER PLAN ALIGNMENT
N/A
STAFF RECOMMENDATION
Recommended Action
Staff recommends and respectfully requests that the Board approve staff’s recommendation to accept the stop loss insurance proposal from HM Insurance Group for the 2025/2026 plan year with the current $300K ISL and $100K ASD at an 8.1% increase in premiums at a PEPM rate of $56.67, reflecting an increase of $87,924, and authorize the Chairman to execute the proposal acceptance after review and approval by the County Attorney as to form and legal sufficiency.