From The Bench
By Thomas A. Croft, Esq.
Yin, Yang & A
Familiar Refrain
remium revenue and claims ior member of the
P
payments are the yin and yang claims department
of stop loss insurance, as they actually reports to the
are with insurance generally. head of the underwrit-
ing department, creat-
The aim, of course, is to make one’s ing what we might call a
yang larger than one’s yin by a margin “yang shop.” Others may
great enough to cover expenses and reverse that relationship,
earn a reasonable profit. The market- putting claims over under-
ing folks and the underwriters strive to writing. Probably the most
grow the yang, while the claims people common structure is to make the
struggle to minimize the yin, consis- underwriting and claims functions
tent the terms of the contracts made. co-equivalent in power, with disputes
to be resolved by the chief executive
The yang-bangers sometimes get or owner, who would presumably
crosswise with the yin-cutters for var- weigh the yin and yang of the situa- for steering it to the carrier denying
ious reasons. A defensible claims tion and make a judgment that he or the claim. The simplistic and inaccu-
denial may adversely impact the busi- she believes is best for the company. rate notion that “we paid premium,
ness relationship with the group, or, If the entity is an MGU, the decision therefore we are entitled to have all
in some cases, the relationship with can always be bumped up to the carri- our claims paid” becomes irresistible
several groups, because the TPA or er level. in this circumstance, and will often be
broker is upset about it. Savings echoed and encouraged by the broker
achieved by enforcing contractual But no matter how the internal deci- or non-ASO TPA to maintain the good
terms can be more than offset by loss sion-making apparatus is designed, graces of its client, to cover for a mis-
of established business. Especially if someone is going to be dissatisfied: take it made, or both. It would unre-
the underwriters receive bonus or either claims will believe that the alistic to expect anything else.
other compensation based on the vol- company has honored a claim that it
ume of premium they bring in, there did not owe, or the underwriters/mar- Often, however, the “damn the carri-
is a built-in structural tension that is keters will blame claims for making er” mentality leads to fruitless and
bound to cause internal conflict soon- their job more difficult (and perhaps expensive litigation, because there is
er or later. How carriers/MGUs bal- even costing them money personally). very little incentive for the
ance the yin-cutting with the yang- broker/non-ASO TPA to provide an
banging would be an apt subject for a All of this gets worse. To a broker or objective analysis of the merits of the
business school case study. non-ASO TPA, a stop loss claim stop loss claim to its client. Having
denial, no matter how justified, is said that, I know that some do, even
Some MGUs separate the underwrit- always bad news. The group (its in those cases where a mistake of the
ing/marketing function entirely from client and ultimate source of revenue) broker or TPA actually caused the
the claims department—erecting a will be dismayed. And the less sophis- denial (e.g., a disclosure oversight, a
sort of Chinese wall between them, so ticated the group is about insurance failure to pay a claim within the con-
that each operates completely inde- matters generally, and the workings of tract period, etc.). Not only is this a
pendently of the other. Others may medical stop loss in particular, the noble thing to do, it is good business.
structure themselves so that the sen- more likely that it will blame its agent If a broker thinks his client is angry
18 • The Self-Insurer
©
/ January 2010
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