What is Stop Loss Insurance?
Stop-loss insurance (also known as excess insurance) is a product that provides protection against catastrophic or unpredictable losses. It is purchased by employers who have decided to self-fund their employee benefit plans, but do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles. There are two types of self-funded insurance:
- Specific Stop-Loss is the form of excess risk coverage that provides protection for the employer against a high claim on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total. Specific stop-loss is also known as individual stop-loss.
- Aggregate Stop-Loss provides a ceiling on the dollar amount of eligible expenses that an employer would pay, in total, during a contract period. The carrier reimburses the employer after the end of the contract period for aggregate claims.
A number of variations are available for each of these two products.
Generally, all but the largest employers will want to protect their plan with both specific and aggregate stop-loss coverage. Occasionally, circumstances may be such that specific stop-loss by itself will fulfill the employer’s need for protection."We are members of other associations, but we are consistently extremely satisfied with the HCAA. Many of the other association conferences or meetings do not always benefit us as their topics are not always relevant to our business – or the speakers only provide a one-sided view of the issue. HCAA is always on the cutting edge and they show you the pros and cons of every issue, the ramifications and the benefits."
– Leah Ann Zogg, CEO Employee Benefits Consultant, California