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  • November 2019
  • 5 minutes

Self-Funding for Regional Health Plans: Pros and Pitfalls

  • David Sipprell
  • Tom Nicholson
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In Brief

Today over 60% of all the employers in the U.S. self-insure their employee medical benefits, and the self-insurance rate is poised to grow even more. Among the options, employer stop loss (ESL) insurance has proven particularly attractive. RGA's Dave Sipprell joins Tom Nicholson of Northstar Strategies in demystifying market entry in BenefitsPRO. To learn more about RGA's health reinsurance offerings and insights, contact us or visit

In fact, today over 60% of all the employers in the U.S. self-insure their employee medical benefits, and the self-insurance rate is poised to grow even more.

Among self-funded options, employer stop loss (ESL) insurance has proven particularly attractive. According to a white paper from RGA and Milliman released in May 2019, the ESL market has nearly tripled over the past decade, growing from approximately $7 billion in premium in 2008 to over $21 billion in 2018. As this growth has occurred, a significant share of it has accrued to health plans rather than traditional ESL carriers. In 2006, health plans represented one-third of the ESL marketplace; that market share grew to nearly 60% in 2018.

A majority of this growth has been concentrated in large national health plans (such as United, Cigna, and Aetna) where the ESL market share has more than doubled, from 16% to 33%. Market share for Blue Cross Blue Shield (BCBS) organizations (including multistate groups such as Anthem or Health Care Services Corporation and single-state Blues plans) is around 18%, having peaked at 23% in 2012. Meanwhile, the market share of other regional or smaller plans has remained quite steady at 5% to 7%.

This latter group of regional plans could represent the biggest opportunity for growth moving forward. It makes good business sense: Self-funding offers an opportunity to drive more patients to provider-owned facilities and capitalize on synergies with employer clients and distribution partners. Perhaps most enticing, the self-funded market can provide risk-free margin at a time when fully insured margins are getting squeezed.

Barriers to Entry

For most regional health plans, the ASO/self-funded market presents many challenges. Up until now, ASO has generally been a defensive strategy for regionals as their main focus has been fully insured and government plans. Most regionals do not have dedicated staff for ASO, so they often lack expertise in all areas – from sales to operations.

Client reporting creates its own set of challenges as prospective reporting is crucial in ASO, and most reporting platforms are currently retrospective. In addition, most of the claims systems at regionals have been designed for fully insured lines of business, limiting claims flexibility. Added to this is an overall lack of product and brand strategy for ASO as marketing resources generally have been directed to other lines of business.

Best Practices for ASO Program Development

A proactive investment strategy and a commitment from the top are key elements for health plans who want to succeed at self-funding and want to bring stop loss into the fold. In addition, health plans should keep in mind the following best practices for program development:

  • Determine goals for the product and its strategic positioning within the organization
  • Capitalize on existing ASO experience and strengths
  • Empower staff to lead program development
  • Implement extensive ASO training across the health plan employees
  • Analyze current ASO systems and processes in an unbiased, realistic way to determine the optimal utilization of resources
  • Conduct market analysis to establish the optimal product strategy and identify target customers

Partnering for Stop Loss Success

Employer stop loss (ESL) insurance is an increasingly popular option for ASO programs, propelled by high-cost drivers such as exposure from specialty drugs and continued growth in $1 million+ claims. ESL insurance allows employers to self-fund while protecting against catastrophic or unpredictable losses as the insurer provides coverage for losses that exceed defined limits.

Engaging a managed care stop loss partner is a key element to long-term success. For instance, RGA’s Healthcare Stop Loss Turnkey solution offers clients a variety of ways to enter the ESL market, including access to a comprehensive suite of services – from handling RFPs and quoting rates and terms to policy administration and claims processing. By working with trusted partners, employers can identify and overcome obstacles to market entry and develop capabilities to achieve their desired results.

Regional health plans need to think of ASO/ESL as a proactive strategy to be driven by dedicated, experienced staff with the support of the health plan’s executive team. Ultimately, the keys to ensuring success include staff training, setting strategic goals, assessing current systems, picking a dedicated ESL partner, and knowing the local market.

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Meet the Authors & Experts

David Sipprell
David Sipprell
Senior Vice President, Head of U.S. Group Healthcare, RGA U.S. Group Reinsurance
Tom Nicholson
President Northstar Strategies


To learn more about RGA's health reinsurance offerings and insights, contact us or visit

About the authors

About Dave Sipprell, Senior Vice President, RGA

David Sipprell leads RGA’s Healthcare Stop Loss Turnkey business. These solutions are designed to assist managed care companies, HMOs, and providers in offering self-funded services and stop loss insurance to their employer groups.

About Tom Nicholson, President, Northstar Strategies
Tom is president of Northstar Strategies, an organization that helps regional health plans in ASO training, sales, and administration. Northstar’s products assist health plans in the development, implementation, and ongoing management of mid-sized ASO business. Northstar also brings significant technologies to their customers in the areas of claims administration, reporting, and enrollment services.