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What is Stop Loss?
Medical Stop Loss Coverage
In a traditional health insurance plan, the employer pays a premium to an insurance company, which assumes the responsibility for covering the employees' healthcare expenses. However, in a self-funded plan, the employer acts as the insurer and pays for the healthcare costs directly, rather than paying a fixed premium to an insurance company. A layer of Medical Stop Loss coverage is added on top of the estimated claims costs to insure the employer from catastrophic claims. This comes in the form of two varieties:
Specific Coverage
Protects employers from large, catastrophic claims incurred by a single individual. The insurance carrier reimburses the employer group when claims of an individual exceed the specific deductible.
Aggregate Coverage
Protects employers from the frequency of claims across the entire population of the covered plan under the specific deductible. A certain dollar amount is set that determines to what level of claims the employer will fund. The insurance carrier reimburses any claims that exceed the attachment point.