Why I stopped using stop loss orders
Commentary: Price alerts offer greater control over trades
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MIAMI (MarketWatch) — I believe in stop loss orders to protect stock positions or to lock in gains. When the stop loss is triggered, your stock is automatically sold at the market at the best available price.
The best available price? Unfortunately, that can be a misnomer.
In a normal market (if there is such a thing), the stop loss can work as intended. You buy a stock at $50, and enter a stop loss order to sell at $47.50, which limits your loss to 5%.
In reality, in a fast market when the stock gaps down (during flash crashes, breaking news, or fake tweets), your stop loss is triggered. The bad news is that it will be triggered at the next available market price, which could be many points lower.
In other words, your stock could be automatically sold at the lowest price, and instead of locking in a 5% loss, you could lose much more.
Another problem with a stop loss order is that when you enter it into the computer, the order is transparent. A game that some market-makers played (these days, it will be computer algorithms) is “run the stops,” when the stock is forced low enough to trigger a large cluster of stop loss orders (usually at round numbers or well-known support and resistance levels). After the stock is sold at a popular stop loss price, the stock reverses direction and rallies.
The biggest problem with stop losses is that you have given up control of your sell order to the computer. During volatile markets, that can cost you money. But there is an alternative.
I still believe in stop losses, but not the automatic kind. Rather than using automatic stop losses, I set up price alerts for the securities I bought (and for those I plan to buy). For example, if I buy XYZ stock at $20 per share, I might set a price alert at $19 (5% loss), and also at $25 (25% gain).
If the $19 alert is triggered, I am notified by email and text message. Next, I’ll turn to my mobile device and decide what action to take. More than likely, I’ll sell depending on market conditions. And if the $25 price alert is triggered, I might sell for a profit or set new price alerts.
The main point is that I am in control of my sell orders. Technology has made price alerts more practicable than in the old days. First, because of mobile devices, you are notified instantly if the target price is triggered. Second, you can take immediate action. Before the Internet, you had to run to a phone and call your brokerage firm. (During the 1987 market crash, phone lines jammed because of the huge influx of orders. By the time brokers entered their clients’ sell orders, stock prices were already at rock bottom.)
Note: Stop loss orders still make sense if you are unable to access your account immediately, for example, if you are on vacation. In addition, if you are not disciplined and ignore price alerts (Stop Loss 조정 hoping your stock will come back one day), automatic stop losses might be a better alternative.
Now, let’s take a look how the overall market is doing, and which are the leading stocks within the strongest sectors. Amy Smith, author of “How to Make Money in Stocks Success Stories” and a market expert at Investor’s Business Daily, gave her view of the overall market.
“We’ve been in an uptrend since November and have had a nice move along the way with the indexes moving into new high ground. Although there were a few distribution days (selling), and the market corrected a little bit, we went back into an uptrend. Savvy investors are keeping a close eye on the volume going into the indexes.”
Smith says to Stop Loss 조정 Stop Loss 조정 watch for heavier volume as the market moves higher. “If volume continues to increase, it indicates institutions are buying shares. The key is whether the major indexes can hold onto their new highs.”
Using the CAN SLIM® investing method, Smith is also looking at how the leading stocks are doing. Are they holding or starting to correct? So far, they are holding on, but Stop Loss 조정 that could quickly change. “If you see indexes and leading stocks pulling back on heavier volume, that is an indication that professional buyers are lightening their positions,” Smith says. “That is the time you don’t want to be in the market.”
One group to watch: Biomedical stocks. These companies produce drugs and services to people that need health care. “We have an aging population and people need these products,” Smith says, “but if this group begins to weaken, that could also spell trouble for the overall market unless another sector takes its place.”
According to Smith, stocks in that sector that have had huge earnings increases so far (ranging from 27% to 63%) include Celgene US:CELG , The Medicines Company US:MDCO , Valeant Pharmaceuticals International US:VRX , Cigna CI, +1.07% , and Biogen Idec BIIB, -3.65% . There are also several ETFs that focus on biomedical stocks. As always, just because this industry has done well in the past is no guarantee it will do well in the future.
My opinion: Many retail investors are still suspicious of this market. Why? Because they think the market is logical. Well, if you want logic, play chess. Otherwise, until there is evidence of a correction or bear market (indicators turning down, more than two strong down days in a row, strong opening but weak close, and leading stocks unable to advance), this bull market will continue. That said, never let down your guard — this market could turn at any time.
Michael Sincere is the author of “Understanding Options,” “All About Market Indicators,” and “Understanding Stocks.” On his website, he lists signals from the most popular market indicators. Michael Sincere and Amy Smith do not own shares of the stocks noted in this article.
Stop-Loss Insurance 101
Stop-Loss Insurance Coverage is defined as a layer of coverage that provides reimbursement to self-insured employers for catastrophic claims exceeding predetermined levels. This coverage is purchased by employers who self-fund their employee benefit plan so that they don’t have to assume all of the liability for losses arising from an extremely high medical claim.
There are many different options for stop-loss coverages and contracts. Before you draft a contract or schedule a meeting with your insurance carrier, here is a brief introduction to the different stop-loss options, contracts, and terms.
What Stop-Loss Coverages Are Available?
Specific Stop-Loss: This form of stop-loss coverage protects a self-insured employer against large claims incurred by a single individual. Under a specific stop-loss policy, the employer will be reimbursed when claims for an individual exceed a specified deductible.
Aggregate Stop-Loss: This form of stop-loss provides a ceiling to the amount that an employer would pay in expenses on the entire plan, on an aggregate basis, during a contract period. Under this policy, the insurance carrier reimburses the employer after the end of the contract period for aggregate claims.
There are a number of variations available for each of these coverages, and there are employers that protect their plan with a combination of both specific and aggregate stop-loss coverages. Here is a quick overview of what specific and aggregate stop-loss policies may look like for your organization.
Specific Stop-Loss At A Glance
Under a Specific Stop-Loss Policy, an employer may elect for a maximum liability per person on their benefits plan. If the claims exceed that point, the stop-loss policy will reimburse the employer for the claims in excess of that amount.
For example, if an employer elects that their maximum liability per person on their benefits plan for that policy year be $100,000, and a specific claimant exceeds that liability and their total claims are $102,000, the stop-loss policy will reimburse them for claims in excess of that amount, the $2,000.
- The maximum liability employers take on can range from $10,000 to $1 million, and Stop Loss 조정 generally fall within 3 to 6 percent of the expected annual claim amount.
- Under a specific stop-loss policy, employers can be eligible to receive coverage for both medical and prescription drugs.
- The contracts that specify these details can be written in a variety of ways depending on the insurance carrier.
Maximum liability per person is determined by employers and their insurance carriers, and the amount an insurance carrier is willing to be liable for is subject to their specific policies.
Aggregate Stop-Loss At A Glance
Aggregate Stop-Loss protects against higher than anticipated claims for the entire plan. If the total paid claims exceed the established point amount, the carrier will reimburse the employer for the excess.
The point at which the insurance carrier is liable is determined by the carrier, and is generally derived from the enrollment on the employer’s insurance plan and on the aggregate attachment factor. The process for determining the aggregate attachment factor is as follows:
- First, the stop-loss carrier determines the average expected monthly claims PEPM based on the employer’s history.
- Then, this figure is multiplied by a percentage ranging from 110%-150%.
- That determined amount is then multiplied by the enrollment on a monthly basis to establish the aggregate deductible.
An example of deriving the Aggregate Stop-Loss coverage is as follows:
- First, the employer and stop-loss carrier establish the average expected monthly claims, for this example $300 PEPM.
- This figure is then multiplied by a percentage usually ranging between 110%-150%, for this example 150%.
- From these calculations, the aggregate attachment factor is established as $450.
- This attachment factor is then multiplied by the employees enrolled, for this example 1,000. This calculation equals out to a total amount of $450,000.
- That amount is the aggregate deductible for the month, and if that enrollment remains the same for the whole year, the annual aggregate will total $5,400,000.
- Assuming enrollment stays level and the contract term is a year, the maximum out of pocket claims for this employer would be $5,400,000.
- If claims exceed this amount, say $5,500,000, the stop-loss carrier will be liable to pay that excess, in this example $100,000.
- $300 x 150% = $450
- $450 x 1,Stop Loss 조정 000 = $450,000
- $450,000 x 12 = $5,400,000
Stop-Loss Insurance Contract Terms and Terminology
In order to fully understand stop-loss policies, it is critical to know the different stop-loss contract terms. Stop-loss contracts are written depending on the agreement made between the insurance carrier and employer.
These contracts specify the time period when the insurer is liable to cover claims and by what time employers must pay the claims they are liable for. There are many different term agreements, and which terms an employer is subject to depends on the contract between the employer and the insurance carrier. These different contract terms can include policies such as:
- “12/12” Contract: Under this contract agreement, claims must be incurred and paid during the plan year.
- “12/15” Contract: Under this contract agreement, claims must be incurred during the plan year and paid either during the plan year or during the three months after the end of the plan year.
- “15/12” Contract: Under this contract agreement, claims must be incurred in the three months prior to the end of the plan date and paid during the plan year.
- Deductibles: The limit at which the insurance company becomes liable for paying medical claims.
- Disclosure: An insurance carrier will require the disclosure of known high claimants or high-risk individuals before giving a final quote.
- Lasering: An insurance carrier can place a higher deductible on certain individuals or exclude them from coverage.
There are many different coverages, contracts, and terms to be aware of when integrating a stop-loss policy in your insurance plan. It is important to open the conversation with your insurance carrier about these different options, to not only understand the best option for your company, but also to understand how a stop-loss policy can impact your company’s bottom- line and safeguard your company overall.
Why Invest in a Stop-Loss Insurance Policy?
By incorporating stop-loss into their insurance policy, these self-funded employers are limiting their risk, safeguarding themselves against high claims, and impacting their bottom-line by opting out of expensive, traditional insurance policies.
- A study showed that from 2005 to 2010 the number of claims of $1,000,000 per million members grew from 11 to 24 claims.
- Without a Stop-Loss policy, self-funded employers would be liable for all these claims.
- A study found that 1% of claimants generate 25% to 35% of claims.
- By incorporating a Stop- Loss plan, employers avoid paying high claims for everyone on their plan, and would be reimbursed by the Stop-Loss carrier for the high claims of the 1%.
- In 2016, a study revealed that self-funded insurers received $6.7 million in claim reimbursements for high-claims associated with complications due to the birth of twins.
- Stop-Loss in this situation safeguarded the bottom-lines of self-funded employers from a short-term, high-claim.
Stop-loss allows employers to benefit from self-funding while limiting the associated risk from a catastrophic single claim or limit overall claim liability. Employers integrating these policies into their insurance plans are taking this one- step further and investing in technologies that they can utilize to show identify historic cost trends and forecast future spending.
How Can Analytics Be Incorporated Into Your Company’s Stop-Loss Plan
Aggregate stop-loss policies are negotiated based on many different criteria, one of which is an employer’s claimant history. In addition, when negotiating any stop-loss policy insurance carriers can exclude high claimants from a policy.
Employers are integrating health analytics platforms with specific stop-loss reporting features to identify and engage high-cost claimants and to keep healthy members healthy. By leveraging this technology, employers have the ability to affect their future rates, and improve the health of their population overall.
These health analytics platforms can also illustrate to employers their specific historical cost trends, and see their forecasted spend. Employers, therefore, are utilizing this technology to understand the savings opportunities of incorporating stop-loss into their insurance policy.
What is a “Stop-Loss” order? Stop-Loss has been described as an involuntary extension of a currently-serving military member’s term of active service. In such cases, the servicemember’s original Estimated Time In Service date (ETS) is extended beyond the original date specified in the servicemember’s legally binding commitment to the military.
If the service member was due to retire or separate in a given month, that date would be suspended under stop-loss and the servicemember’s active duty commitment is extended to a new date.
Stop loss can also affect permanent change of station moves in a similar fashion to the COVID-19 stop-movement orders issued in the first quarter of 2020. With stop-loss, PCS moves could be suspended in order to maintain unit integrity or to prevent shortages in certain types of staffing for mission-critical operations.
What You Need To Know About Stop-Loss
The key to understanding how stop-loss works is in the legally binding contract each new recruit signs when joining the military. There are two types of service commitment; an overall promise to be available for duty.
Let’s say a new recruit discusses her options with a recruiter for the Army, Navy, Marine Corps, Space Force or Air Force. The recruit decides to sign up for a four year term of active duty service. But that does NOT mean that the recruit only has a four year commitment.
There is also a period of “inactive service.” The recruit may sign up for a four-year enlistment but there is an additional four years required. That four years does not require the new recruit to perform active duty, and you are not paid for that four years. You are essentially available to be recalled for duty should the military encounter a need to call up those who are inactive.
How Stop Loss Is Communicated To Troops
Stop-loss orders are made at the appropriate level (in some past situations, the President has delegated the authority to issue stop-loss to the service chiefs such as the Secretary of the Navy, Secretary of the Air Force, etc.) and communicated to the troops.
How? Electronic messaging, Commander’s Calls, unit stop-loss briefings given in a town-hall style meeting or video, etc. Each affected unit orderly room or command support staff has information on the order when it is made (no stop loss orders are in effect at the time of this writing) and more.
Troops who are affected by stop loss may notice a code or other identifier, or their military records flagging them as being unable to retire or separate. All military services have their own Stop Loss 조정 ways of dealing with enlistment codes, stop-loss, and related procedures.
Stop Loss Is Legal
Stop-loss can extend the servicemember’s active commitment to go beyond the initial contract and include active service that cuts into the inactive reserve time described above. This is explained in the contract and is how the Department of Defense has successfully fielded lawsuits challenging the legality of stop-loss.
U.S. courts seem to consistently find that an extension of enlistment is permitted and legal based on the nature of the legally binding contract the DoD and new recruits enter into together.
Two Types Of Stop-Loss
Stop-loss measures can be directed at certain career fields, but also certain military units.
Career field-based stop-loss is meant to prevent the loss of critical skills in that career field. These skills may or may not have security clearance implications, and it’s never safe to assume that a career field is immune to stop-loss just because it has no Classified or Top Secret classification requirements.
A unit-based stop-loss order would prevent specific military units from losing essential personnel and skills. A good example of a unit-based stop loss involves orders hypothetically aimed at units coming to and from Operation Enduring Freedom or Operation Iraqi Freedom to keep consistent troop levels and prevent retirements or separations from those units.
In the past, troops affected by stop-loss who belong to a unit scheduled for deployment would be subject to potential orders keeping them in uniform for the deployment and for 90 days following that deployment.
But that is not an across-the-board, arbitrary number. Troops should not expect stop-loss orders to be identical in duration or parameters to similar orders given in the past. Such orders are structured on a case-by-case basis to best serve the circumstances they are needed for.
A Brief History Of Stop-Loss Orders
Some form of stop-loss has been with the United States Military at least since the Civil War; one of the first recorded cases of a legal challenge to an involuntary extension of a military service commitment is found during the Civil War when a Union soldier sued the government for extending his three-month service commitment.
The suit failed, and the soldier was confined for a short time for what some sources describe as “mutinous conduct.”
At the time, the phrase “stop-loss” wasn’t used for such needs, and the modern incarnation of the practice has a definite 20th century origin. While some sources report the first contemporary use of a stop-loss order came during the Vietnam War era, the start of what could be described as the modern version of this policy is found in the United States Code, Title 10 from 1984.
This policy allows the Commander-In-Chief to suspend rules for promotions, retirements, and separation in times of national emergency, or when the President calls up Reserve components. Stop-Loss saw some revisions in the early 2000s, but Public Law 110-329, Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 further codified the policy.
However, some including the Defense Secretary at the time felt that stop-loss broke faith with troops affected, and by 2011 no branch of military service was actively pursuing the measure.
Stop Loss In Modern Military Missions
Stop-loss orders were given during the following contemporary periods of military operations:
- Persian Gulf War
- After the 9/11 attacks
- Global War on Terror
The policy has been legally challenged several times. However, federal courts have consistently found that military service members contractually agree that their term of service may be involuntarily extended until the end of their obligated service.
Stop-Loss And American Culture
The stop-loss issue rose to prominence in American culture in the first decade of the new century. In 2008 the Hollywood film Stop-Loss debuted, produced by MTV Films and starring Abbie Cornish, Channing Tatum, Ryan Phillipe, and Joseph Gordon-Levitt. Directed by Kimberly Peirce, the film is about how stop-loss affects some military families. It opened to negative reviews, but 2007 and 2008 were bad years for war films; Rendition, plus Redacted, and In the Valley of Elah also suffered at the box office at the time.
Stop-Loss the film raised the issue of what some label a “reverse draft” or “back-door draft”, but moviegoers might not be aware that DoD stop-loss policies have been (more or less) consistently applied in times of major conflict including wars in Iraq, the global war on terror following 9/11, etc.
The policy may be controversial, but its use has not been historically arbitrary in spite of whatever impressions are left by Hollywood films. Some might assume the military uses stop-loss anytime they have an overseas mission, but since 2009 the following stop-loss activities should be noted–the U.S. Army was the last service to still use stop-loss in 2009 but since then:
- Army active duty stop-loss ended Jan. 1, 2010
- Army Reserve stop-loss ended August 2009
- Army National Guard stop-loss ended September 2009
- Then-Defense Secretary Robert Gates announced a no-stop-loss policy in 2009 that sought to keep the authorization, but effectively end the practice.
Can Stop-Loss Happen Today?
In early April 2020, some headlines openly speculated about a return to stop-loss procedures as a response to COVID-19 pandemic mission requirements, but at the time of this writing no such plans are known. It’s always a possibility in times of national emergency, but at the time of this writing no plans to return to Stop-Loss are available to the public, if any.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
The Definitive Guide on How to Set a Stop Loss
In today’s post, you’ll learn what a stop loss order is and how to apply it.
This guide will teach you how to apply it no matter what market or broker you choose.
So let’s get started…
What is a stop loss order, and why it’s important
A stop loss order is a type of order that gets you out of a trade automatically.
It means that you don’t need to stare at your charts the whole day and try to scare your pants off as the price approaches your stop loss order.
I’m not going to lie to you…
It hurts taking a loss…
Even if it’s just a losing trade.
But how would you feel when your stop loss order got hit, but the price went against you even more.
You’re not there to take the hit:
You feel relieved, right?
Not only you freed up space on your portfolio early to look for better trading opportunities.
But you also prevented a huge potential loss.
Can you see why this is important?
That’s why you can think of a stop loss order as a “risk police” that prevents you from losing more money or have unexpected losses.
Now you’re probably wondering:
“What if my broker doesn’t have a stop loss order?”
“I can only exit manually; what should I do?”
Don’t worry, because, in the next section, I’ll make sure to have all the answers to your questions.
How to set a stop loss order no matter what trading platform you choose
Here’s the thing:
If your trading platform does not have a stop loss order, it’s essential to know the different types of market orders.
There can be a hundred types of market orders out there, but it all boils down to four:
- Buy Stop
- Buy Limit
- Sell Stop
- Sell Limit
Let me briefly explain…
Buy Stop – An order to go long when the market exceeds a specific price level.
Buy Limit – An order to go long when the market drops below a specific price level.
Sell Stop – An order to go short when the market exceeds a specific price level.
Sell Limit – An order to go short when the market rises above a specific price level.
Now, if you want a more intuitive “cheat sheet” to understand all of these in one go, then check this out:
(please save it as it might just save your life in the markets)
Okay, so, how exactly does this relate to setting a stop loss order?
Buy Stop & Sell Stop
If you’re trading breakouts…
Then you’d want to set a buy stop order at the breakout point, then place another sell stop order below the price, which acts as your stop loss order.
Buy Limit & Sell Stop
If you’re trading pullbacks…
Then you’d want to set a buy limit order at the pullback, then place another sell Stop Loss 조정 stop order below the price, which acts as your stop loss order.
Now, how about when shorting?
Sell Stop & Buy Stop
If you’re trading breakouts…
Then you’d want to set a sell stop order at the breakout point, then place another buy stop order above the price, which acts as your stop loss order.
Sell Limit & Buy Stop
If you’re trading pullbacks…
Then you’d want to set a sell limit order at the pullback, then place another buy stop order above the price, which acts as your stop loss order.
If you’re curious to learn more about breakouts and pullbacks, then you may want to read this article here: The Definitive Guide to Trading Pullbacks and Breakouts
Pro tip: If your broker doesn’t have stop loss orders, you can use TradingView (free) to set price alerts
So now that you know how to set your stop loss order…
The next thing you have in mind might be:
“Where can I set my stop loss order?”
That’s what we’ll cover in the next section.
So hold on tight and read on…
How to know where to set your stop loss order
Knowing where exactly to set your stop loss order is crucial.
This is because the last thing you want to do is to place it at random places, just like how you’d throw a dart blindfolded.
So here are three different ways where you can set your stop loss order:
- Below support
- Below swing low
- Below the trend line
Let me show you…
An area of support shows where the buyers and sellers have respected the level a couple of times.
Setting your stop loss order below support can be effective when trading range markets.
Here’s what I mean…
Pro tip: avoid support levels tested more than five times, as a level becomes weaker the more times it is tested.
Below swing low
A swing low on your chart represents the “nearest low” on your chart.
Setting your stop loss order below the swing low is favorable, especially for strong trending markets that barely produces any support levels
Here’s an example of a breakout setup using this technique:
Of course, you’d want to add a “buffer” below the swing low as you wouldn’t want to get stopped out prematurely.
A trend line is when you connect two or more swing lows, and it acts as a support area within a trending market.
The best part about using a trend line is that it also acts as a dynamic level to place your stop loss order.
Using this technique is usually effective for trends that tend to respect the swing low.
Which one should you choose?
Which is the best one?
I’m not going to lie to you…
There’s no such thing as the best.
Because what matters is for you to choose one thing you can apply consistently.
Understanding Stop-Loss Insurance
Employers who offer their employees a health benefits plan may want to consider adopting a stop-loss policy to obtain reimbursement for losses stemming from frequent or expensive claims. Let’s first look at why a benefits plan is important for business growth. Running a successful business requires a team of capable and reliable workers, and attracting such a workforce often requires that employers offer attractive perks to the job, including a robust and comprehensive health insurance plan. Many small and midsize employers are adopting self-funded captive insurance plans, much like those that over 90% of large corporations have been using for decades. These plans give employers much more control and personalization of their benefits policy compared to the fixed cost of a fully insured group health insurance plan. But self-funding by definition means that the employer is taking over the responsibility for delivering the plan’s health care benefits. So, while having a benefits package in place is important, employers must also mitigate risk and keep potential losses from claims in mind. That’s where a stop-loss insurance plan comes in. With the delivery of stop-loss insurance coverage though a group captive plan, even small and midsize businesses, which typically don’t have the financial backing that large corporations do, can absorb losses from a bad claims year.
What is Stop-Loss Insurance?
Stop-loss insurance is designed for employers who self-fund their health benefit plans for their employees but want to hedge against the risk of assuming 100% liability for losses that stem from catastrophic claims. With a stop-loss employee health insurance policy, the insurer is liable for any losses that go over a set employer deductible limit. For small and midsize businesses, this limit can be as low as $10,000. With stop-loss insurance coverage, employers can protect their financial reserves and their bottom line. There are two types of stop-loss insurance coverage: specific stop-loss and aggregate stop-loss.
Specific Stop-Loss Insurance
Also known as “individual stop-loss,” this type of insurance provides risk coverage against high-value claims on an individual. Rather than providing protection against an atypical number of claims, specific stop-loss insurance protects employers against an unusually high claim from a single person.
Aggregate Stop-Loss Insurance
This type of stop-loss insurance covers the total claims of all covered members, rather than individual claims, in a plan year. Aggregate coverage limits losses to a certain amount over a contractual period. If the total claims go above the aggregate limit, the insurer would reimburse the company. Some self-funding insurance plans leave all the liability for medical costs in the hands of employers. But Stop Loss 조정 with a stop-loss component in place, employers are protected against unusually high claims from individuals and/or a high claims frequency of claims for all covered employees.
How Stop-Loss Insurance Works
Imagine if several employees at a company contract a virus, resulting in a large number of claims. Or two or three employees develop a major disease or illness, like cancer or kidney disease, that results in hundreds of thousands of dollars each in medical care. A stop-loss insurance plan protects the employer in both cases from these losses. Essentially, stop-loss insurance is a tool used by employers to mitigate against the risk of catastrophic financial loss. Losses are capped at a certain amount, and any costs in excess of contracted limits are covered by the stop-loss insurer.
Stop-Loss Coverage and Group Captive Insurance
If you’re considering group captive insurance, It’s important to understand the mechanics of stop-loss coverage. For a better view of how the two work together, let’s first take a brief look at group captives and why they make sense for small and midsize companies. You are, no doubt, aware of the rapidly increasing cost of health insurance. Employers who have a health benefits plan in place for their employees are often forced to pay exorbitant fixed-cost premiums, especially during years where the number of claims is particularly high. This leaves employers with constantly increasing premiums, deductibles, and copays on plans offered to employees. For this reason, an increasing number of employers are looking for better alternatives to traditional fixed cost health insurance, and self-funded employee benefits plans are gaining in popularity — especially as part of a group medical captive. With a group captive, self-funded insurance plans enable employers to band together and share risk, making it an attractive option for small and mid-size companies who do not have the scale to self-fund on their own. Self-funding through a group captive also offers a lot more plan flexibility and control, which, in turn, can help companies realize significant cost savings. Stop-loss coverage is a critical component of a self-funded health insurance plan. The stop-loss policy covers claims above the plan’s retained claims. The claims fund of a self-funded employer will pay claims up to the predetermined deductible for each of the company’s covered employees. The role of the stop-loss is to cover all claims above these deductible levels. When stop-loss coverage is added to a group captive plan, it spreads the risk of catastrophic claims over all members of the captive, decreasing volatility and costs for all.
Why Choose Roundstone For Group Captive Insurance?
For over a decade, Roundstone has been offering small and midsize employers a better alternative to conventional health benefit products with its group medical captive solution. Following are just a few benefits that coverage with Roundstone can offer your company.
Freedom of Choice
Though no two companies are alike, it’s standard practice for insurers to offer a limited number of options for companies to choose from. At Roundstone, we recognize that every company is unique. We take the time to get to know your company and its specific needs and use that information to help you create a customized plan that’s tailored specifically to your business. A more customized health benefits program will benefit your current employees, and it will likely be more attractive to potential new hires as well.
Affordable Health Insurance
As we mentioned, medical care and health insurance are both on the rise, with double-digit increases over the past few years, leaving employers paying out sizable contributions. And while many Americans depend on their employers’ health benefits packages for medical care coverage, many smaller-scale companies simply can’t manage the increased expense on their own. Even as rising health care costs far outpace increases in wages, many companies are forced to shift these premium increases onto their workforce through an increased share of their premiums as well as higher deductibles and copays. But doing so can have a negative impact on attracting and retaining good workers. Many employees are either unable or unwilling to assume the added financial burden. Many abandon their current employment in search of a job that provides more comprehensive care that doesn’t leave them with ever-increasing out-of-pocket costs. A group captive insurance plan from Roundstone is a viable solution for small and midsize employers. Over the past five years, all of our group captive clients saved money compared to fully insured alternatives, and two-thirds saved 20% per year. At the same time, their workers are benefiting from more affordable health care that covers more of what they need.
With Roundstone, a portion of a company’s stop-loss premium is part of a shared risk pool with other group participants. If you have any stop-loss premiums that were not spent by year end, those funds are returned to the participating members with a distribution check. This is in addition to the unused small-claims funds your company gets to keep each year.
It’s common for employers not to know what their current health care plan covers and where their claims dollars go. They simply receive an invoice from their insurers and are typically left in the dark about what was covered and for how much. Many insurance carriers consider this information a trade secret, so employers are left in the dark about how their insurance dollars are spent. With a group captive insurance solution from Roundstone, you will have total data transparency and control over your insurance spend. Rather than making a futile attempt to obtain claims data from your insurance company, your participation in a group captive insurance plan through Roundstone will allow you to have direct access to the data you need to understand exactly how your claims dollars are spent. More specifically, you’ll have access to the CSI Dashboard, an analytics platform that will clearly detail and lay out your claims data. This platform can also help pinpoint where improvements can be made to contain costs.
A fully customized plan means you’ll have total control over the exact plan that is best suited for your company. You’ll have control over things such as the third-party administrator (TPA) and pharmacy benefits manager (PBM) Stop Loss 조정 you work with and where to allocate your funds based on how your workforce uses their benefits. You’ll also have control over how most of your money is spent, as only 15% of your premium is fixed, meaning you have a say in how the other 85% is spent. This is in stark contrast to fully insured plans, which typically come with costs that Stop Loss 조정 are 100% fixed. With Roundstone’s group captive insurance solutions, you’ll have plenty of cost-control options and expert assistance to help identify them.
Roundstone has been committed to captive insurance members for over 10 years. We’re an Inc. 500 company with the expertise in the health insurance industry to help you create a cost-effective, custom solution that will benefit both you and your employees.
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It’s easy to learn more about the benefits of group captive health insurance for your company. Request a proposal and benchmark review today. We’re happy to discuss your options so your company can start right away protecting the health of both your employees and your business.