Top Three Challenges to the Self-Funded Market, From the Experts

By BCS Chief Actuary Mehb Khoja

Firm & Final: The Legends of Stop Loss and Reinsurance is a podcast I launched in 2022 to bring together legends from the stop loss, reinsurance, and self-funded industries to discuss industry issues, trends, and to share experience and advice for the next generation.

I’ve recorded 12 interviews with some of the most experienced folks in the industry, and I asked them all what they believe to be the biggest risks facing our industry. Here are the three top answers I’ve heard:

1. High-cost drugs, like gene therapy
Not surprisingly, cellular and gene therapy came up as the top risk to our industry almost every time. These life-saving treatments pose an enormous risk to payers, and with an additional 3,633 CGTs in progress as of Q2 2022, the pipeline is all but ensuring the industry take action and innovate around this growing trend. To date, we’ve seen new reinsurance programs, alternative payment models, risk-pooling, and patient assistance programs pop up to solve for the growing risk, but no “one-size-fits-all” solution is apparent yet.

2. Naïve Capacity
Between the large national and regional health plans and third-party companies, there are about 90 stop loss carriers in the market – all competing within a finite marketplace. A concern shared by many I spoke to was managing this competition, and successfully balancing appropriate rates and risks with sales goals.

Many agreed that carriers and reinsurers need to be more disciplined, focusing on measured sales, and acknowledged that gene therapy, which can wipe out profits with a single claim, plays a big part.

3. Work from Home
Despite companies such as Twitter, Starbucks and Disney announcing “return to work” plans in 2023, data scientists at Ladders insist that remote work is here to stay. While pros and cons abound for both in-office and remote work, the lack of face-to-face relationship building, and particularly mentorship, is concerning to the folks I spoke with. As you may have heard in some of the Firm & Final episodes, many Legends got their ‘big breaks’ from the relationships they had developed, either through handshakes, conferences, or simply being in the office.

As we look to develop the next generation of stop loss and reinsurance leaders, many Legends I spoke with thought this lack of mentorship can be a hinderance, one that we have not solved for just yet.

Now I ask you – did the Legends get it right? Or are there other, more imminent risks out there? I’d love to hear your thoughts. Contact me via email or LinkedIn to connect.