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Risk Management/Stop Loss Protection#
Coverage for High-Cost Health Claims#
As employers and plan sponsors consider the logistics of switching to a self-funded plan, there’s a common question that gets asked right away:
“What happens if a few unexpected, high-cost health claims come in or the total amount in claim charges goes way beyond what we anticipated?”
This is where stop loss insurance comes in. Just as the traditional insurance company invests in re-insurance should costs exceed the money they have budgeted toward health claims, companies who self-fund frequently protect their plans with stop loss insurance.
True to the theme of customizing self-funded plans, stop loss allows companies many options for coverage. Those who have a strong cash flow and reserves may be willing to absorb more of the claim costs and have a higher specific deductible/attachment point for when stop loss kicks in to reimburse the plan or employer (whichever pays the premium for stop loss).
The Two Types of Stop Loss Coverage#
Many stop loss policies provide self-funded plans/employers with a double trigger, which offers protection based upon two different levels of coverage:
- Individual Level: Specific Deductible – Total dollars for claims incurred by a plan member exceed a set point (the total claim amount for this one employee may not necessarily trigger the aggregate attachment point)
- Aggregate Level: Attachment Point – Total dollars of all claims incurred by the employee benefit plan exceed a set point (dollar amount) after adjusting for specific insurance reimbursements
When choosing the right stop loss insurance option, many of the conditions and levels of coverage can be negotiated to best fit the employee benefit plan or employer. This insurance is specially designed to provide protection and peace of mind for unexpected, and sometimes catastrophic, expenses.
For more information on how stop loss insurance works, check out this article: The Basics of Stop Loss Insurance