Stop-Loss Insurance

Protecting You with Stop-Loss Insurance

For small and mid-sized employers, self-funding is really “partial” self-funding because stop-loss insurance is purchased to cover catastrophic claims.

ASR can assist you in determining what stop-loss coverage you should purchase.  We can even help you evaluate other risk-transfer options, like transplant insurance to cover catastrophic claims rather than covering them under the self-funded plan.

There are two main types of stop-loss insurance:

  • Specific stop-loss insurance protects the plan against an individual catastrophic claim.
  • Aggregate stop-loss insurance covers claims that exceed a given amount for the entire covered group.

How does stop-loss insurance work?  The following is a brief illustration of stop-loss insurance:

  • If your limit for specific stop-loss is $50,000 (per covered person per year) and one member incurs claims of $75,000, the plan’s liability would be limited to $50,000, and the remaining $25,000 would be reimbursed by the stop-loss carrier.
  • When an entire covered group has expected claims of $500,000 per plan year, reimbursement by the stop-loss carrier would normally take place if actual claims exceed 125% of the expected claims, or $625,000 overall.
  • The $625,000 amount is referred to as your attachment point, or the amount above which the carrier has liability.
  • The cost of a self-funded plan is the total of fixed costs (e.g., administrative expenses, stop-loss premiums, etc.) and the claims paid by the plan less stop-loss reimbursements.

At ASR, our industry experience, business relationships, and expertise enable us to secure the best stop-loss protection for our clients.  We work with only high-quality stop-loss markets that offer a variety of contract options, which allows us to help our clients select the most appropriate coverage at competitive rates.