Stop Loss Insurance

Stop Loss insurance policies provide coverage to self-funded medical plans. Stop Loss insurance is becoming much more prevalent today due to recent U S health care reform. The new laws require most self-funded medical plans to remove individual lifetime maximums for plan years starting six months after the date of enactment, and Jan. 1, 2011 for calendar year plans.

There are two types of coverage under these policies, “Specific Claim” and “Aggregate Claim” coverage. While “Specific” policies are more prevalent among Plans than aggregate policies, the exponential increase in medical claim costs over the last decade makes “Aggregate” coverage an important option for many self funded Plans. Many plans are rightfully worried about this new uncapped potential liability and need stop-loss insurance to cover this additional exposure.

A “Specific” policy covers the medical claims of one employee. If a plan sponsor buys a policy with a $250,000 deductible, the stop-loss policy would pay for any eligible claims greater than that amount for a specific loss.

On the other hand, an “Aggregate” policy would cover a plan sponsor should the total amount of claims in a given year exceed a specified aggregate amount. Aggregate stop-loss insurance limits the dollar amount of claims that a medical plan is responsible for on total claims paid within the terms of the policy for that year.