Oct. 15, 2012
Editor’s Note: This is Web-only bonus coverage from “Is Self-Funding Right for You?” in the October 2012 issue of CUES’ Credit Union Management.
The practice of “lasering” can leave a credit union that self-funds employee healthcare with burdensome, potentially catastrophic, financial liabilities—even when stop-loss coverage is in place.
Credit unions that self-fund take on the risk of paying for health costs, often realizing a great savings over a traditional insurance plan along the way. Stop-loss coverage is a way to decrease the financial risk of self-funding. With this coverage, employers are still responsible for paying all eligible claims regardless of the attachment point (annual dollar figure for which the employer is totally responsible for paying claims during the policy year) levels.
But the stop-loss provides the employer with a financial reimbursement mechanism after those claims have been paid. The stop-loss amount can vary from plan to plan, with some employers taking on more risk with $100,000 limits, and others opting for very little risk at $20,000.
Lasering means a stop-loss carrier identifies specific employees who are likely to have large claims (think transplants or other expensive treatments) and either places a higher deductible on these individuals or excludes them from stop-loss coverage.
Michael W. Ferguson, chief operating officer of the Self-Insurance Institute of America, Inc., Simpsonville, S.C., says these employees still receive health insurance coverage, but “the employer cannot seek financial reimbursement from the stop-loss carrier for costs incurred by the individual.” The practice of lasering is becoming less common, he says, because “carriers have become increasingly sophisticated in their underwriting practices, so they’re better prepared to deal with known high-dollar claims.”
Ferguson adds that decisions to choose a plan that includes lasering really come down to how comfortable an employer is with premium costs and risk.
Elizabeth Jimenez, SPHR, VP/human resources and organizational development at $562 million/54,000-member Tropical Financial Credit Union with 185 full-time equivalents in Miramar, Fla., says lasering goes against the CU’s philosophy. “We make sure that when our broker negotiates on our behalf, lasering is not an option,” she says. It’s important to her team that all employees are covered, and that they’re treated well. “We really believe in employee satisfaction, just like member satisfaction,” she says.
If a carrier includes lasers during plan negotiations, try asking for a laser-less quote so you can compare costs and make the right decision for your CU, Jimenez recommends.
Julie Knudson is a freelance writer and owner of Olympic Bay Media, Inc., Arlington, Wash.