Stop-loss insurance in health care is a type of financial protection designed primarily for self-insured employers. When a company opts to self-fund its employee health benefits rather than relying on traditional insurance, it assumes the risk of covering employees' medical expenses. However, this can expose the employer to significant financial risk, especially if high-cost medical claims arise.
Stop-loss insurance mitigates this risk. It serves as a safety net, covering claims that exceed a certain threshold, known as the attachment point. There are generally two types of stop-loss insurance: specific and aggregate. Specific stop-loss coverage kicks in when an individual's claims exceed a set dollar amount within a policy year. On the other hand, aggregate stop-loss coverage activates when the total claims for all employees surpass a predetermined limit.
By having stop-loss insurance, employers can effectively manage their potential liabilities while still enjoying the flexibility and cost savings associated with self-insured plans. This coverage is particularly beneficial because it allows companies to gain greater control over their health care costs. Additionally, it ensures that they won't face overwhelming financial burdens due to unexpectedly high medical expenses, safeguarding both the business's financial health and the employees' access to necessary healthcare services.
In summary, stop-loss insurance is a crucial component for self-insured health plans, providing essential protection against high-cost claims and enabling employers to maintain a balanced approach to their employee health benefits. This arrangement not only protects the financial interests of the employer but also supports employee well-being by ensuring access to necessary medical care.