Understanding Stop Loss
What is Stop Loss insurance?
- Stop Loss limits a self-funded employer’s health plan liability to a specified amount and protects 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.
How does Stop Loss protect a self-funded health plan?
- Stop Loss protects the employer 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, etc.
- 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
- 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)
Common Stop Loss Terms
Disclosure – Statement an employer must complete to identify all employees who are not “actively-at-work,” all individuals who are institutionally-confined, all large claims and all potentially catastrophic losses
Lasering – The practice of assigning a higher Specific deductible for an individual with a known condition that is likely to exceed the Specific deductible
Subrogation – The process that allows an insurance company to seek recovery/reimbursement when it has paid claims for injury or illness that may have been caused by a third party
Creating the Right Plan
Stop Loss contracts have a wide variety of options and riders available to help with cash flow, risk tolerance and long-term claim situations. There are many strategies and programs that can be implemented to help contain costs based on each group’s specific dynamics and needs. Contact your benefits broker or consultant and let them know you’d like to find out more about how HM Stop Loss protection can help meet your needs.
For more information, contact your benefits broker or consultant and ask about HM Insurance Group.