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Intro to Stop Loss
In the ever-changing insurance marketplace, many employers are finding that traditional programs no longer meet their coverage needs or cost expectations for employee benefits. This leads them to the self-funded route as a way to gain more control of their plans. For employers that self-fund their health plans, Stop Loss coverage helps to protect against the financial risks associated with catastrophic claims.
In order to understand Stop Loss insurance, let’s first examine what self-funding means to a group.
What Is Self-Funding?
With a self-funded plan, the employer, not a carrier, is responsible for the claims. This is different from a fully insured plan, wherein the employer pays a fixed premium to an insurance carrier that retains the risk (and also the gains or losses from each group’s claims experience if the claims are less or more than the premium). A self-funded employer pays claims as they are presented. The plan is administered by a Third Party Administrator (TPA) or by an insurance carrier functioning in an Administrative Services Only (ASO) capacity. To help protect the company’s finances, the employer can purchase Stop Loss insurance, which works to protect against the risk of catastrophic claims or more significant utilization that results in higher than expected costs for overall claims.
Additional self-funding topics and resources you might find helpful:
- Guide to Self-Funding –
- What Is Self-Funding? (1 minute, 16 seconds) –
- Who Should Self-Fund? (1 minute, 8 seconds) –
What Is Stop Loss Insurance?
Stop Loss coverage helps to protect self-funded employers from the financial loss associated with catastrophic claims – or a multitude of unanticipated claims – as well as high costs associated with unknown medical claim risks and the rising costs associated with cancer, preterm birth, transplants, pharmaceutical therapies, etc. Here are important points to remember about Stop Loss:
- Stop Loss limits a self-funded employer’s health plan liability to a specified amount and helps to protect the financial integrity of the self-funded plan
- The contract is between the carrier and the employer; it does not cover individuals
- Self-funded clients typically engage the use of a third-party administrator (TPA) to administer their plans, and that TPA handles claims, reporting, network and case management, billing, etc.
What Are the Two Types of Stop Loss Coverage?
- Specific Coverage:
- Specific Stop Loss reimburses the employer for a catastrophic claim on any covered individual during a contract period
- The employer must first satisfy the “per person” deductible before reimbursement of claims begins
- Aggregate Coverage:
- Typically purchased in conjunction with Specific coverage, Aggregate Stop Loss reimburses the employer for total plan claims that exceed expected plan claims by more than an established percent
- Eligible claim expenses that the employer must pay before the Aggregate benefit will be reimbursed are determined through an Aggregate Attachment Point (corridor); this percentage is used to determine the monthly Aggregate deductible amount for the policy term, and the group is expected to be able to fund the anticipated claims, plus the additional amount (corridor)
Additional Stop Loss topics and resources you might find helpful:
- Stop Loss Basics –
- How Does Stop Loss Protect? (1 minute) –
- Stop Loss 101: Self-Funding and Stop Loss Basics Training Presentation –
- Stop Loss 201: Rating a Case Training Presentation –
- Leveraged Trend Overview –
- What Is Leveraged Trend? (2 minutes, 17 seconds) –
How to Select a Stop Loss Carrier?
Not all Stop Loss carriers are the same. Expert risk assessment and exceptional service delivery extend a carrier’s value far beyond the cost of the coverage. Certain characteristics should be present to help best protect your clients’ bottom line and your reputation. When helping clients to determine the right carrier for their protection, look for these traits:
- Direct writer
- Financially sound
- Stable business model
- Accurate, timely claims payment
- Focus on cost-containment
- Clearly articulated contract
- Tailors plans to the group’s needs
- Writes over multiple payers
Additional resources you might find helpful:
- Are You Selecting the Right Carrier? –
- Mitigating Risk: Captives vs. Carriers –
- HM Sparks: Carriers vs. MGUs –
- How Do I Select the Right Carrier? (1 minute, 17 seconds) –
High-Cost Claims: Medical Advancements and Pharmaceutical Therapies
High-cost claims continue to grow in frequency and severity. This can be tied to medical advancements and the increasingly common approval of extremely high-cost – even multimillion-dollar – pharmaceutical therapies. Monitoring claim trends plays an important role in a carrier’s ability to deliver the right Stop Loss protection to self-funded employers. It’s smart to look for a carrier that bases its decisions on data and trend analysis – one that looks at group dynamics and uses market insights to create informed solutions.
Additional resources you might find helpful:
- HM Stop Loss Claims History and Trends –
- Quick Reference Guide to High-Cost Medications & Therapies –
- Rx Benefits, High-Cost Therapies and Stop Loss–
- Pharmacy Focus: Zynteglo® – New Gene Therapy for Beta Thalassemia –
- Pharmacy Focus: Pipeline Therapies to Watch through 2022 –
- Pharmacy Focus: The Evolution of Cancer Treatment –
HM Insurance Group’s Approach to Stop Loss
Whether covering groups of 100 or 2,000, HM Stop Loss enables self-funded employers to protect their assets from unexpected large or catastrophic claims, helping to protect financial wellbeing as health care costs continue to rise in a changing market. Using a wide range of deductibles and contract periods, we structure custom plans to help satisfy specialized needs and help mitigate claim risks.
- HM Stop Loss Financial Protection for Self-Funded Groups –
- HM Stop Loss 2021 Operational Performance –
- High Performance Stop Loss Infographic –
HM Insurance Group’s Claim Submission Process
The following materials explain HM Insurance Group approach to a smart and efficient Stop Loss claims process.
- Claim Submission Checklist: Employer Stop Loss –
- How Do Smart Stop Loss Carriers Work to Manage Claim Costs for Their Clients? (1 minute, 51 seconds) –
HM Insurance Group’s Cost Containment Strategies
At HM Insurance Group, we use data and trend observations; smart business practices like the proactive oversight of claims; and knowledge of vendor engagement opportunities to make recommendations that can help our clients and their administrators gain better control of claim outcomes and costs. The following materials explain our cost containment strategies as well as case studies that share examples of success stories.
- HMConnects™ Your link to smart cost containment strategies –
- Delivering Uncommon Success with Claims –
- Stop Loss Cost Containment Vendors –
- What is HMConnects™? (1 minute, 56 seconds) –
Contact your HM Stop Loss Sales Representatives for more information
Director, Regional Sales
HM Insurance Group