Do Stop Loss Insurance Policies Pay Retail ?

     Most medical stop loss insurance policies pay retail instead of lower, negotiated discounted fees. Most don’t know this and don’t care, “since it is the insurance company paying the bill.”  The fact of the matter is that we are all paying for the higher reimbursement rates in loaded premium charges, as much as 46% more.

Hospital PPO contracts contain outlier provisions. Once the outlier, or threshold is reached, a typical PPO contract then reverts back to a small percent off “billed” charges, all the way back to the first dollar. Many of these PPO contracts stipulate that the outlier discount is 5% off billed charges.

Billed charges are like new car sticker prices; there is no correlation between the sticker price and actual costs. It is an arbitrary made up number, and the number is put up there really high. That makes the PPO discount look really good. But it is all a game foisted upon the unknowing consumer.

So, if the PPO outlier is placed at $50,000, and a typical PPO average “discount” is 35%, then a $45,999 hospital bill is repriced through the PPO contract by 35%, or $32,499. But, if the claim comes in at $50,001, the discount is reduced to 5% and the PPO repriced bill then becomes $47,501. This represents a +46% increase in plan reimbursement to the hospital.

As you can see, it is in the best interest of the hospital to inflate the bill to exceed the outlier. They get paid more money. And is it no wonder that almost all PPO contracts prohibit the payer from auditing the hospital’s bill?

Do you get the picture now?

Could this pricing phenomenon be linked to increasing stop loss premium? Why would you pay a vendor for the privilage of paying exhorbitant fees to pay for exhorbitant hospital charges?

More and more employers who self fund their group medical plans are eyeing captives.

Editor’s Note: Compare your current stop loss premium with this report:

Also see HM Insurance article –,0,w (excellent piece)