ELIMINATION OF MARGINAL PLAYERS MAY SPARK JUMP IN STOP-LOSS RATES

The lengthy brawl among insurers that has kept medical stop-loss rates low will ease this year, and some employers can expect to pay more as the market firms up, underwriters and analysts predict.

Stop-loss insurers saw margins squeezed once again in 1996 amid fierce competition, but many anticipate 1997 will be their best time in four years due to some marginal stop-loss players being forced out of the market, said Scott Taylor, vp of SAFECO Life Insurance Co. in Seattle.

"Most people who have been in it a long time are probably pretty optimistic about the stop-loss market," Mr. Taylor said. In addition, he said, "We don't see any real legislative, regulatory or legal challenges to stop-loss."

Other underwriters also are expecting rates to rise and are wondering how long policyholder accommodations, such as multiyear contracts, can continue if prices are about to rise.

"If you believe the soft market has to come to an end soon, this

is the worst time to give twoor three-year guarantees," Ed Ueeck, managing director of Fountain Valley, Calif.-based Pacific Risk Management Services, a unit of PM Group Life Insurance Co.

There is probably a better than 50% chance that stop-loss rates will rise promptly, and some rates are now flat or are rising already, said Gary Lake, a principal with New York-based A. Foster Higgins & Co. Inc.

According to statistics released by Foster Higgins last month, 57% of self-funded employers with at least 500 workers have medical stop-loss coverage, but only 31% of self-insured companies with more than 20,000 employees do. That finding reflects the belief, common among the largest U.S. companies, that occasional catastrophic illnesses can be covered by corporate resources, rather than insurance, according to Mr. Lake.

It is that perspective that has helped lead to a contracted market and kept stop-loss prices at rock bottom.

Interestingly, among small companies-those with fewer than 500 employees-the proportion of employers with stop-loss insurance more than doubled between 1995 and 1996, to 24% from 11%, the Foster Higgins study found.

This shows small employers with good experience are taking advantage of the soft market to give self-insurance a try, Mr. Lake said. It remains to be seen if firms this size "can stomach the fluctuations" inherent in shouldering their own risk, he said.

At the same time, some insurers are exploring markets for medical stop-loss coverage outside the United States.

Minneapolis-based National Benefit Resources Inc. opened an office in Buenos Aires, Argentina, last year and plans to begin selling health stop-loss insurance in April. Eventually, President Joseph McErlane said, the company wants to sell stop-loss in Chili, Venezuela, Brazil and elsewhere in Latin America.