This FAQ was developed to assist you in evaluating Spectrum as a resource for obtaining medical stop loss coverage. These questions were culled from TPA questions over the years, and also from issues that we feel are important for you to know about every stop loss facility. Knowledge is power. Determining the issues that are important to you and evaluating your stop loss markets by their stance on those issues will best position you for growth and success.
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1. When was Spectrum founded?
Spectrum was founded as a full-service managing general underwriter of medical stop loss insurance on June 1, 1990.
2. Who are the principals/owners of Spectrum?
- Kurt Ridder
- Mary Ann Ridder
- Mike Finn
- Rodney Garrison
3. Who comprises Spectrum’s day-to-day management team?
- Kurt Ridder, President
- Mike Finn, Vice President of Sales & Marketing
- Rodney Garrison, Vice President of Underwriting
- Darrin Napier, Vice President of Claims
- Marla Thombleson, Manager of Administration
- Tina McElroy, Office Manager
- Glenda Garrison, Controller
4. What carrier does Spectrum represent and what is its A.M. Best Rating?
- Zurich American Insurance Company
- A.M. Best Rating: A+ (Superior)
- Financial Size Category: XV ($2 billion or greater)
- Outlook: Stable
- A.M. Best #: 03565
- NAIC #: 27855
- www.zurichna.com
5. Is Spectrum’s stop loss carrier available through other stop loss sources?
Yes, on a direct basis for cases with 200 or more employee lives.
6. What is Spectrum’s reinsurance arrangement?
The carrier assumes 100% of the risk to an unlimited specific maximum and to an aggregate maximum of $2,000,000. No reinsurance mechanism is used.
7. Does Spectrum participate in the risk on business it underwrites?
No.
8. Is there any ownership between Spectrum and its carrier?
Spectrum is a privately held stock company owned entirely by the principals listed above. No ownership interest exists between Spectrum and any carrier or reinsurer.
9. What functions does Spectrum perform for its carrier?
Spectrum is a full-service managing general underwriter, performing all functions relating to medical stop loss coverage, including marketing, underwriting, excess claim adjudication, policy issue, premium administration, commission payment, product development, and auditing.
10. What is Spectrum’s authority level on behalf of its carrier?
Spectrum has full authority to bind coverage and pay claims on behalf of its carrier. Spectrum’s carrier agreement stipulates that all specific and/or aggregate excess claims over $200,000 be adjudicated by Spectrum but reviewed by the carrier prior to release.
11. Does Spectrum own or operate a third party administrator?
Spectrum does not operate any third party administrator, nor does Spectrum (or its principals) have any ownership interest in any third party administrator.
12. What is Spectrum’s Professional Liability (E & O) coverage?
| Carrier: | XL Insurance | ||
| Policy Limit: | $2,000,000 each claim; $2,000,000 aggregate | ||
| Deductible: | $25,000 | ||
| Expiration: | October 31, 2012 |
13. What is Spectrum’s Commercial Crime (employee dishonesty) coverage?
| Carrier: | Fidelity & Deposit Company of Maryland | ||
| Policy Limit: | $1,000,000 | ||
| Deductible: | $25,000 | ||
| Expiration: | September 1, 2012 |
14. Has Spectrum ever had an E & O or fidelity claim?
No.
15. Has judgment ever been rendered against Spectrum in a court of law?
No.
16. Is Spectrum a member of any trade or professional organizations?
Yes. Spectrum is an active member in the Self-Insurance Institute of America (SIIA), the Society of Professional Benefit Administrators (SPBA), and the Health Care Administrators Association (HCAA).
17. What products does Spectrum offer?
Spectrum offers Specific, Aggregate and Integrated Stop Loss Insurance.
18. Does Spectrum offer a “No Laser Renewal / Renewal Increase Maximum” option?
Yes, for a specific premium load of 7%, no new lasers will be imposed at the next renewal and the specific rate increase at the next renewal will not exceed 45%, provided renewal terms are on a like-to-like basis (contract type, specific deductible, commission level, enrollment, TPA, PPO, plan design, etc.).
19. Does Spectrum offer a specific terminal liability option?
Yes, for a specific premium load of 10% at inception, a three-month claim payment extension is available.
20. Does Spectrum offer an aggregate terminal liability option?
Yes, for a premium of $1.00 per employee per month, a three-month claim payment extension is available, calculated by extending the in-force aggregate factors by three months (based upon the average enrollment in the final quarter of the contract year).
21. Does Spectrum offer an integrated terminal liability option?
Yes, for a premium load of 10% at inception, a three-month claim payment extension is available, calculated by extending the in-force integrated funding factors by three months (based upon the average enrollment in the final quarter of the contract year).
22. Does Spectrum offer a monthly aggregate accommodation option?
Yes, for a premium of $1.00 per employee per month.
23. Does Spectrum offer a medical conversion option?
Yes, through Celtic Life Insurance Company for a fee of 60¢ per employee per month.
24. What is Spectrum’s minimum and maximum eligible group size?
25 to 199 employee lives (certain state-specific restrictions apply).
25. What is Spectrum’s minimum specific retention?
$10,000 (certain state-specific minimums apply).
26. What is the maximum specific limit available?
Unlimited. Lower lifetime limits are available.
27. What is the maximum aggregate limit available?
$2,000,000 is standard on all cases between 25 and 100 employee lives. $1,000,000 is standard on all cases over 100 employee lives; $2,000,000 is available on a facultative basis.
28. Will Spectrum write aggregate-only coverage?
Traditional aggregate-only coverage is not available. Spectrum does offer integrated stop loss insurance, which has no specific retention and features a monthly-accumulating integrated attachment point.
29. Does Spectrum require life insurance in conjunction with stop loss coverage?
No.
30. How long does it take Spectrum to issue a stop loss quote?
Proposals are issued within five to seven working days. Earlier need dates are met on a routine basis, as requested.
31. Will Spectrum release a manual quote on groups where total paid claims experience is unavailable?
Yes. Total paid claims experience is required on all currently self-funded groups, as well as all fully-insured groups over 100 employee lives. Fully-insured groups of 25 to 100 employee lives must provide total paid claims experience when available; when unavailable, manual stop loss quotes can be issued.
32. Does Spectrum market to agents and/or brokers?
Yes, on a limited basis.
33. Will Spectrum grant a TPA or agent/broker an exclusive marketing arrangement?
No. However, Spectrum will not saturate an area or state with approved producers and will take into consideration primary competition when evaluating producer prospects for approval.
34. Will Spectrum release a stop loss quote to more than one approved producer?
Yes, to a maximum of three as follows: Two prospect producers plus the incumbent producer. Identical information will generate an identical quote. Information from one producer will not be used to improve terms for other submitting producers.
35. What is Spectrum’s policy on a case moving from one TPA to another?
On in-force business, Spectrum requires written notification from the policyholder in the event it wishes to change from one Spectrum-approved TPA to another approved TPA, off-anniversary or at renewal. If the take-over TPA is not currently approved by Spectrum, the in-force TPA must sanction the move and the take-over TPA must complete a TPA questionnaire and is subject to the same approval criteria as a prospect TPA. Approval is not automatic.
36. What happens in the event a case has shrinking enrollment over time?
Spectrum’s premium and renewal policies regarding a reduction in case size are as follow:
- A prospect case (new business) underwritten with enrollment at or above 25 employee lives that falls below 25 employee lives at inception will be declined coverage.
- Any in-force case with enrollment below 25 employee lives at its contract anniversary date is not eligible for renewal.
- Cases must remit premium at actual enrollment levels down to 25 employee lives. Any case with enrollment below 25 employee lives must remit premium on a minimum of 25 employee lives. Any premium due above the actual enrollment (up to 25 employee lives) is based on the single rate.
- The following exceptions apply to the 25 employee lives minimum:
- CT minimum is 26 employee lives
- CA, DE, FL, HI, MN, NH, NY, NC & OR minimum is 51 employee lives
Spectrum does not cancel cases at any time during the contract period due to declining enrollment.
37. What stop loss commission levels are available from Spectrum?
Commission levels from 0% to 15% (in 1% increments) are available on traditional specific and aggregate stop loss and commission levels from 0% to 5% (in 1% increments) are available on integrated stop loss.
38. What are Spectrum’s premium payment/receipt procedures?
Premium may be remitted either gross or net of commission, however, the producer must be appointed by the issuing carrier in the state where the case was sold prior to any commission being released by Spectrum or withheld by the TPA. All premium checks must be made payable to Spectrum Underwriting Managers, Inc. Premium may also be paid via ACH transfer. The following time-table applies to premium remittance:
- Premium Due Date: 1st Day of the Month
- Grace Period Ends: 31st Day after Due Date
- Pre-Cancellation Notice Sent to TPA: 32nd Day after Due Date
- Cancellation Notice Sent to TPA & Insured: 45th Day after Due Date
39. In the event a case is cancelled for non-payment of premium, is reinstatement of coverage available?
Yes. In the event a case is cancelled, a reinstatement application and instructions are sent to the TPA. Application for reinstatement must be made within 15 days of the date of cancellation notification. The following conditions apply to reinstatement:
- The application for reinstatement must be signed and dated by an authorized representative of the Insured.
- The effective date for reinstatement will be the day following the last day for which premium was paid.
- All overdue and current premium amounts must be submitted with the application for reinstatement.
- The Insured (or its duly authorized representative) must submit monthly loss reports and experience data as requested by Spectrum.
- Spectrum’s receipt and deposit of overdue premium in connection with the application for reinstatement does not constitute acceptance of liability on behalf of the insurer. In the event Spectrum does not approve reinstatement, its sole obligation shall be to refund the unearned premium.
- No coverage is considered reinstated until Spectrum confirms the reinstatement in writing. Such confirmation or denial will be made within five (5) working days of receipt of the required items.
40. Under what circumstances will Spectrum correspond directly with the policyholder?
Spectrum’s direct dealings with policyholders are limited to the following instances: A) Cancellation due to non-payment of premium; B) legal or litigation matters; and C) at the request of the current TPA.
41. What Plan cost information does Spectrum provide to the TPA?
At contract year-end, Spectrum provides certain information necessary to complete IRS Form 5500 Schedule A.
42. In what states can Spectrum underwrite stop loss coverage?
Traditional specific and aggregate stop loss is available in all 50 states and the District of Columbia. Integrated Stop Loss is available in the District of Columbia and all states except the following:
- AK, CO, HI, KS, LA, ME, MD, MN, NH, NY, OK, OR, VT & WA
43. What types of Plans will Spectrum underwrite?
Spectrum’s eligible Plan types include single employer Plans (an employer/employee relationship must exist), churches, municipalities and school districts.
44. What are Spectrum’s ineligible industries and/or Plan types?
Associations, METs, MEWAs, employee leasing companies, PEOs, casinos, Indian Tribes and nuclear power facilities are ineligible. Hospitals, nursing homes and trucking companies are underwritten on an experience-only basis. Further, hospitals are subject to 80% coinsurance on domestic charges.
45. What are Spectrum’s Plan participation requirements?
- Non-contributory plans require 100% enrollment of eligible employees
- Contributory plans require 75% enrollment of eligible employees; lower participation levels will be considered
- Eligible employees are defined as full-time (20+ hours/week) employees not covered by another health plan
46. What specific and aggregate contract types are available?
- 12/12 Incurred & Paid in 12 Months
- 12/15 Incurred in 12 Months & Paid in 15 Months
- 12/18 Incurred in 12 Months & Paid in 18 Months
- 15/12 Incurred in 15 Months & Paid in 12 Months
- 24/12 Incurred in 24 Months & Paid in 12 Months
- Paid Paid in 12 Months
Spectrum will consider other options on a case-by-case basis.
47. Will Spectrum offer incurred & paid (12/12) contracts at renewal?
12/12 specific and integrated contracts are generally renewed on a “paid” basis, which offers the greatest protection to the Plan and eliminates adverse selection against the carrier. In the event a 12/12 specific or integrated renewal is requested, the Insured must sign an acknowledgement letter that outlines the risk associated with a 12/12 specific or integrated renewal. Spectrum will renew 12/12 aggregate contracts on a 12/12 basis without an acknowledgement letter.
48. Does Spectrum place claim dollar run-in limits on paid or run-in contracts?
No.
49. What type of stop loss contract does Spectrum issue?
Traditional specific and aggregate stop loss contracts issued are reimbursement contracts and, as such, require that all claims are properly funded and paid within the time frame required by the applicable contract type (12/12, 12/15, paid, etc.). Integrated stop loss claims are paid once the accumulated integrated retention is exceeded.
50. Does Spectrum offer advance reimbursement on Specific claims, and if so, how does it work?
Yes, provided the following requirements are met:
- The claim is in compliance with all terms and conditions of the Plan Document and the stop loss contract.
- The Insured has paid all eligible charges up to the specific level.
- All premiums due are paid in accordance with the provisions of the stop loss contract.
- The advance request is received in writing prior to the end of the claim payment period as defined in the stop loss contract.
Spectrum considers the date the TPA processed the claim as the claim payment date, provided funds sufficient to honor all amounts up to the specific retention are on deposit as of the claim processing date.
51. Does Spectrum review evidence of insurability on behalf of the Plan, employer or TPA?
No.
52. Can Spectrum change rates or factors during a contract year?
Yes, but only in the event of a material change in the risk (e.g. Plan amendment, addition/deletion of subsidiary, significant enrollment change, misrepresentation of underwriting information, etc.).
53. Will Spectrum non-renew a case based on experience?
No. Spectrum will offer renewal terms on all in-force stop loss coverage regardless of experience. Two events will lead to non-renewal: A) The carrier’s state approval for stop loss coverage is altered or rescinded; or B) case enrollment falls below 25 employee lives (or other state-specific minimums as outlined in question #34).
54. Does Spectrum apply a higher specific retention (laser) to individuals with ongoing large claims?
Insureds can select a variety of underwriting methods for addressing known ongoing large claims, including higher specific retentions (lasers), aggregated specifics, and/or premium loads.
55. Does Spectrum require a Plan Sponsor Disclosure Statement, and if so, under what circumstances?
Yes, Spectrum requires a completed Plan Sponsor Disclosure Statement on both new and renewal business. Spectrum uses the “industry standard” Plan Sponsor Disclosure Statement, although with slight form modifications. The completed Plan Sponsor Disclosure Statement is required no sooner than 60 days prior to the effective date.
56. How does Spectrum treat the actively-at-work issue?
No actively-at-work provision applies or is included in the stop loss contract.
57. When does Spectrum consider a claim “paid”?
Spectrum considers the release date of a check or draft as the claim payment date, provided that funds sufficient to honor the released check or draft are on deposit as of the release date of the check or draft. On specific advances, Spectrum considers the date the TPA processed the claim as the claim payment date, provided funds sufficient to honor all amounts up to the specific retention are on deposit as of the claim processing date.
58. Does Spectrum use the Plan’s definition of reasonable and customary?
Yes.
59. Does Spectrum participate in any claim administration costs relating to large claims?
Certain claim negotiation fees up to 25% of savings, charged by an independent vendor and paid by the Plan, will be considered for reimbursement under the stop loss coverage as a loss adjustment expense, provided the applicable specific and/or aggregate retention is penetrated.
60. Does Spectrum participate in subrogation?
Spectrum reserves the right to subrogate on behalf of its carrier if the Plan fails to do so, and may assist in subrogation matters when requested.
61. Under what circumstances will Spectrum waive contractual time limits?
Spectrum will consider keeping a contract year open in the event payment of a claim must be delayed due to situations such as subrogation, bill negotiation, litigation, etc. Spectrum must receive a request in writing prior to the end of the contractual claim payment period before any contractual time limits will be waived or extended.
62. Does Spectrum have any pre-excess claim notification requirements?
Yes. With specific stop loss, Spectrum requires notification when total eligible charges on any individual claimant reach 50% of the specific retention or when there is a diagnosis of or treatment for any of the ICD-9 codes listed in the Policyholder Disclosure Statement.
On integrated stop loss, Spectrum requires notification when total eligible charges on any individual claimant reach $15,000 or when there is a diagnosis of or treatment for any of the ICD-9 codes listed in the Policyholder Disclosure Statement. Further, although no specific retention applies, Spectrum requires written proof of loss on all individual claimants exceeding $30,000 in total eligible charges.
63. Will Spectrum pay out-of-contract (ex-gratia) claims?
Out-of-contract claims are considered for payment on a case-by-case basis, and only when in the best interests of the Plan and the carrier.
64. What information does Spectrum require to pay a specific stop loss claim?
Basic information required to pay a specific claim consists of the following:
- Specific Stop Loss Claim Form
- Enrollment Card (include change forms, Medicare forms, COBRA forms and termination notices)
- Explanation of Benefits (EOBs)
- Itemized Bills
- File Documentation (include correspondence, coordination of benefits forms, subrogation forms, etc.)
- Reasonable & Customary Calculations (for all surgical, anesthesia and assistant surgery procedures)
- Claim Check Copies (or other claim payment verification, subject to approval)
65. Will Spectrum accept “reduced paper” specific claim submissions?
Yes, Spectrum will waive the submission of certain claim information (such as itemized bills) on excess claim amounts up to $25,000, provided available TPA claim system reports contain the necessary information and are pre-approved by Spectrum’s Claim Department. Full claim submissions may occasionally be requested as an auditing control.
66. How long does it take Spectrum to pay a specific stop loss claim?
Spectrum pays all eligible specific claims within five to seven working days of a complete specific claim submission. Specific claim reimbursements in excess of $5,000 are sent by priority mail.
67. What information does Spectrum require to pay an aggregate stop loss claim?
Basic information required to pay an aggregate claim consists of the following:
- Aggregate Stop Loss Claim Form
- Report(s) Listing:
- Name of Employee and Claimant
- Incurred Date and Amount of Charge
- Amount, Date and Check Number of Each Payment
- Type of Service Rendered or Supply Provided
- Funding Records
- Refund/Void Report
- Specific Analysis Report
- Itemized Prescription Drug Card Invoices
- Eligibility Report Listing:
- Name
- Single/Family Status
- Type of Coverage (medical, dental, PDC, life, etc.)
- Effective, Change, Termination Dates
- Report Listing Out-of-Contract Payments
68. How long does it take Spectrum to pay an aggregate stop loss claim?
Spectrum pays all eligible aggregate claims within ten working days of receipt of a complete aggregate claim submission, or aggregate claim audit report (when required).
69. What are Spectrum’s aggregate claim auditing requirements?
Typically, Spectrum performs a “desk audit” by reviewing the required aggregate claim information on all aggregate claims up to $50,000. On aggregate claims in excess of $50,000 an on-site audit is generally required, to be performed either by Spectrum or an independent claim audit firm. Spectrum reserves the right to perform an on-site audit on any aggregate claim, regardless of size.
70. What information does Spectrum require to pay an integrated stop loss claim?
Basic information required to pay an integrated claim consists of the following:
- Integrated Stop Loss Claim Form
- Paid Claim Reports
- Check Register
- Funding Report (including proof of funding)
71. How long does it take Spectrum to pay an integrated stop loss claim?
Spectrum pays all eligible integrated claims within four working days of receipt of a complete integrated claim submission. All integrated claims are sent by overnight courier.
72. Does Spectrum issue the stop loss contract to the employer or the Plan?
Spectrum will issue the stop loss contract in either the name of the employer or the Plan.
73. What does Spectrum require to issue a stop loss contract?
The following information is required prior to issuing the stop loss contract:
- Request for Coverage Form
- Original Signed Application
- Specific and Aggregate Premium Due
- Signed Plan Document
- Inception Census
- Signed Plan Sponsor Disclosure Statements
- Final Month’s Claims
- Underwriting Contingencies (case specific)
74. Does Spectrum require certain Plan Document language?
Yes, all Plan Documents must include acceptable definitions and/or provisions relating to the following areas:
- Coordination of Benefits
- Experimental Procedures
- Medical Necessity
- Reasonable & Customary Charges
- Subrogation
- Worker’s Compensation
Further, Plan Documents must not include any references to the stop loss carrier.
75. How long does it take Spectrum to issue a stop loss contract?
A maximum of ten working days after all required sold case information, including the Plan Document, is received by Spectrum.
Spectrum welcomes your questions or comments regarding this FAQ or any other issues that you feel are important or will contribute to the continued growth of the self-insurance industry. Please contact Spectrum toll-free at 800-804-7732, by fax at 317-692-3293 or e-mail us at info@spectrumhq.com.
Rev. 12/07/2011
