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Navigating Stop Loss

March 25, 2024

Mike Tesoriero has seen a lot over the course of his twenty-five years as a consultant with The Segal Group. Now a Senior VP and Health Consultant in Segal’s New York office, Tesoriero has spent the last ten years diving into the world of Stop Loss coverage. As a member of Segal’s Medical Stop-Loss Leadership Group, he negotiates Stop Loss contracts and manages vendor relationships while also conducting internal and external Stop Loss training seminars. In a recent Q&A, Tesoriero spoke about the ways Stop Loss carriers are navigating the emergence of gene-therapy drugs as well as his work alongside The Union Labor Life Insurance Company (“Union Labor Life”) in the Taft-Hartley marketplace.

How did you get involved in the Taft-Hartley marketplace?

I’ve been in the business since March of 1989, but I started working at Segal Company in June of 1998. I was in their corporate space for about five years and then in 2003 I joined the company’s Multi-Employer Health Department in New York. So that’s how I started working with the Taft-Hartley labor space.

Can you tell me a little about your consulting role at Segal?

I’m a health and welfare consultant to twenty or so different clients—mostly in the New York and New Jersey area. My clients are from all different sorts of industries, you know, the building trades and laborers, teamsters, electrical workers, plumbers, UFCW clients and such.

My day-to-day work is fairly technical and has to do with developing fund projections and reserve calculations—things that are involved with more of the cost and plan design aspects of the funds. When we perform fund projections, we look at the three years prior and three years going forward to try to give them a sense of what direction expenses and income are going, how their reserve stacks up to that, and how to plan accordingly.

I started picking up Stop Loss within the past 10 years. It has become more of a special practice within what I do, and that expands beyond my own client base. Union Labor Life is Segal’s largest partner when it comes to Stop Loss nationwide, so we have built a close relationship overtime.

How do Union Labor Life and Segal work together with Stop Loss?

I can speak to it locally as well as nationally. So, I believe we have around 250 clients that are self-insured with Stop Loss, and Union Labor Life has the largest market share at this time with about 90 or so.

Our work environment is very collegial, collaborative and respectful. It’s a relatively small team, and we really do get to know each other on both a professional and a personal level, which is nice. You know, it kind of adds a nice little dynamic to the whole thing. It’s not just, “I need a rate, give me the rate” sort of thing (laughs).

Stop Loss is interesting because it’s a year-round coverage. It’s different than say, life insurance, where you work on it every couple of years. You settle it, you put it to bed, and you don’t think about it. Stop Loss is different because of the emerging technologies, the high-cost treatments, and the nature of the coverage. I feel like as soon as we put a Stop Loss bid or renewal to bed, I blink, and it’s back (laughs).

And we have them year-round, too—they’re not all just January. We have January, February, a lot of April, July. It’s a little slower over the summer, thankfully. But it’s really a year-round process. So, we’re constantly working through renewals or bids together. When we’re not doing that kind of work, we’re working through claim issues, policy changes or some type of Stop Loss related thing.

The Stop Loss market is continuing to evolve. What are some of the changes you are seeing?

The mechanics of Stop Loss coverage are still very similar, but the emergence of gene therapy drugs—which are now being administered with FDA approval—has really transformed the landscape. The way these gene therapy drugs work is that they either turn on, turn off, repair, or replace a gene in your code. While these drugs represent wonderful advancements, they do come with a significant cost. These therapies are still rare at the moment, but if you have a large enough book of business, you could see them start to put pressure on your Stop Loss policies.

I remember maybe seven years ago; the highest cost drugs weren’t enough to create shock claims. Maybe $10,000 a year, or between $15,000 and $30,000. But now, we’re seeing drugs like Strensiq that are $100,000+ a month and the prescription is ongoing for the patient’s lifetime. Hemophilia drugs like Hemlibra can cost up to $50,000 per month. There are just so many more high-cost drugs out there and they will likely spill into Stop Loss policies.

They are also impacting the process for adding drugs to Stop Loss plans. If you wanted to add drugs to a Stop Loss policy five to seven years ago, it was very easy. You didn’t have to really do much or provide much data. Now, you have to provide two years of large claims data just around the Rx, because you really need to look to see what’s there.

Do you think this is going to be an ongoing problem to navigate? Or is this just kind of a blip on the radar?

Now that researchers have mapped the genome, these types of drugs will continue to emerge. There are close to 20 gene therapy drugs that have been FDA approved (17 currently) and they are for the most part used to treat very rare conditions. But I’ve seen reports that suggest that additional treatments are forthcoming and will likely be more broad based. So, I don’t see it as being a blip—I see it as being part of the norm.

Have there been any developments in the insurance field like this in the past?

The only thing similar that comes to mind is that organ transplants tended to be a real high-cost driver. Some of the Stop Loss carriers used to have a separate product that carved out these operations from Stop Loss coverage. You would pay a fixed per-member, per-month cost, and the carrier would cover that on a first dollar basis. Sort of like insurance for insurance—taking that one piece out, putting it on the side, and handling it that way.

Some of the carriers, and not just the Stop Loss carriers, but also medical carriers are now applying that method to gene therapy drugs. They are offering products that are taking that gene therapy piece off the Stop Loss plate and putting it on the per individual per month side. They collect that little dollar from many, many clients across their book of business and create a separate pool for it.

Ultimately, that may be the way this new dynamic gets handled. Stop Loss isn’t a great option because it’s such a large cost. But maybe you can pull it out, put it on the side, and deal with it as a separate pool—whether at a national level or within your own company.

You’ve been a consultant for over 20 years. What’s an important lesson you’ve learned along the way in your career?

You know, it’s not completely about the work per se. It’s about the way you interact with people. It’s being responsive—listening to what someone’s needs and concerns are and responding accordingly and promptly. I just try to remember that we don’t make anything at Segal. I’m not producing a phone. I’m not carving a widget and selling it. Clients are leaning on us for knowledge—our ability to guide them and offer them trusted advice.

That can vary depending on each client’s needs, but I’ve always tried to be as responsive as possible. I make sure that when someone asks a question, they know they’ve been heard. It’s also important to get back to them in a reasonable amount of time. If you don’t have an answer to a question, there’s nothing wrong with that. You just say “I don’t really know exactly. I’ll look into it and get back to you.”

It just comes down to that respect you should have between people. And I carry that through to the vendors we work with, the clients we have. It just permeates across all of what we do. There are so many lessons, but that’s probably one that touches them all.

This conversation has been edited and condensed for clarity.