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Board declines purchase of external stop-loss reinsurance after Aon analysis
Summary
Acting on Aon’s recommendation, the Health Service Board voted unanimously to forgo buying external stop-loss (reinsurance) for SFHSS self-funded and flex-funded plans, citing contingency reserves, plan stabilization policy and Blue Shield pooling.
The San Francisco Health Service Board voted on March 8 to follow its actuary’s recommendation not to purchase external stop-loss reinsurance for the system’s self-funded and flex-funded health plans.
Mike Clark of Aon explained that SFHSS’s contingency reserve policy (maintained at a confidence interval and audited externally), the plan-stabilization policy that permits amortization of prior-year gains and losses, and the Blue Shield flex-funded product’s $1,000,000 per-claimant pooling provision together provide protection against catastrophic claim events. Clark said the Blue Shield pooling arrangement charges a per-subscriber fee (cited in the presentation as $22.48 for 2018) and that in 2017 Blue Shield pooled out roughly $6,000,000 across five individuals who exceeded $1,000,000 in claims.
Board members asked for clarifications on pooling mechanics, example amounts and whether stop-loss premiums would be cost effective compared with pooling fees. Aon noted that over a three-year span pooling fees in some years exceeded pooled amounts and in others (including 2017) the arrangement was net beneficial.
Commissioner (speaker 2) moved to accept the actuary’s recommendation not to purchase external stop-loss insurance; the board approved the motion unanimously.
What the vote means: SFHSS will continue to rely on internal contingency reserves, existing stabilization policy amortization, and Blue Shield’s large-claim pooling rather than seeking separate reinsurance at this time. Staff will continue to monitor large-claim experience and present comparative options if conditions change.
