01.10.23 Blog

How Lasering Leaves Plan Sponsors on the Hook – And Without Proper Protection

protect against high-cost claims lasered out by traditional stop-loss insurance

Rising healthcare costs and risk remain hot topics within our industry — especially as it relates to specialty medications. That includes the rising tide of drug prices in the U.S., particularly for specialty medications. Today, many manufacturers are also claiming that, due to extensive research and development needed, as well as the fact that many of these medications only target smaller populations, specialty medications require heftier price tags – resulting in them now accounting for 55% of spend. As a result, one high-cost specialty drug can drive plan costs of more than $250K for a given claimant in a single year.

Under the weight of these costs, employers are seeking help from sustainable solutions to contain costs. Such initiatives, like patient assistance programs for low-income and underinsured patients funded by drugmakers or charitable foundations, can help offset the high cost of specialty drugs prescribed to treat conditions such as arthritis, psoriasis, cancer and hemophilia. Alternatively, some employers rely on traditional stop-loss insurance to keep both their business and employees afloat, but that approach also has its shortcomings.

The Wavering Promise of Stop-Loss Insurance to Mitigate the Effects of Costs

Stop-loss insurance is a necessity for self-funded employers to mitigate the impact of large claims, and likely many of your clients have it already. However, traditional stop-loss coverage has its limitations. While usually limited to one-year terms, stop-loss contracts may not provide the multi-year, long-term protection employers seek when dealing with pharmacy benefits. Additionally, employers often incur significant rate increases – or they may see their protection disappear altogether – as a result of lasering following large claims.

Lasering, an approach where a stop loss-carrier discontinues covering a high-cost claim or claimant occurs more often than you might think. In fact, 21% of plans reporting at least one lasered claimant. And while ​​lasering doesn’t have a strong impact on members, as their benefits continue as promised, it is the employer that is left on the hook and without proper protection. 

Here’s what we mean: 

Real-Case Impact of Traditional Stop-Loss Contract Lasering

After a year of coverage following a catastrophic drug claim, traditional stop-loss providers often “laser” out the claimant from coverage. That means an employer is left vulnerable as the stop-loss carrier limits the amount paid for high-risk individuals while increasing the employer’s liability.

Consider this. One of your client’s employees has a child who has just been diagnosed with leptin receptor deficiency – a rare condition that causes severe obesity beginning in early childhood. They’ve been prescribed Myalept, which retails at an average monthly wholesale price of about $77,000, costing the employer nearly $924,000 annually.

Your client’s stop-loss insurance contract kicks in after the employer pays the initial agreed-upon deductible, so they are covered for the first year. The challenge really occurs in the second year when the traditional stop-loss carrier lasers out the claim, effectively ending coverage after the first year. And in the worst-case scenario, depending on when the claim was made in year one, the drug may have only been covered for a few months.

Get Additional Protection: Supplemental Stop-Loss Insurance

Once a claim has been lasered, your client is completely exposed. While still in a contract that no longer serves the client’s needs, the employer is left navigating unexpected costs. This is where supplemental stop-loss insurance can offer your clients additional protection.

Supplemental stop-loss insurance, like RxPharmacy Assurance, is designed to protect an employer once claims are “lasered out” and potentially defends the client against future lasers. 

For instance, supplemental coverage through RxPharmacy Assurance can help by covering up to $1 million annually, or $3 million a lifetime, per condition and claimant, supporting a self-insured employer from taking on a high-cost, unexpected claim. With RxPharmacy Assurance, employers can maintain affordable coverage with their stop-loss carrier and fill the gap with supplemental stop-loss – staying protected against lasering. Want more insight on how you can help your clients survive the rising tide of pharmacy costs? Click here to check out our recent webinar for more information.