Our management strategy is separated in specific risk layers. We make it clear we want the reinsurance layers to be true reinsurance, with no repercussions to the employer in the event of a catastrophic claim.
The First Layer
The self-funded layer below the specific stop loss deductible is the most predictable and the spread of risk is across the employee base of each employer. That is, the employers pay their own self-funded risk.
The Working Layer
(specific stop loss layer)
The insurer should pool mid-size shock claims within the purchasing group. The risk is spread across all the employers in the initiative. This pooling takes place as part of the calculation of ongoing stop loss rates.
The Catastrophic Layer
Very large shock claims should be fully insured with a stop loss carrier. That is, designate a portion of the stop loss premium to cover catastrophic claims.