What medical conditions are most likely to bankrupt a self-funded employer? Not surprisingly, cancer and several other costly, complicated diseases.
Self-insured employers directly pay for their employees' medical costs, and they hire health insurers or third-party administrators to handle the back-end work. This differs from fully insured employers, who pay health insurers to take on all the risk and benefits services of their employees.
Self-insurance is inherently risky since employers are on the hook for paying all bills and could receive unexpectedly high claims at any time. To guard against catastrophic medical claims, self-insured employers buy stop-loss coverage where a carrier covers all costs after a certain threshold is met.
Sun Life Financial is one company that sells stop-loss insurance to employers. It recently combed its stop-loss claims from 2011 to 2014 and found that 10 medical conditions accounted for more than half of the $2.1 billion it paid out to policyholders. The top three conditions—malignant neoplasms, leukemia/lymphoma/myeloma cancers, and severe kidney disease—cost Sun Life $699 million over that four-year period alone.