Stop Loss coverage, or excess loss coverage, or even mis-labeled as “reinsurance,” is a product that nearly all self-funded health plans must consider. It is always the right choice. Only the very largest companies can afford to operate a Self-Funded plan without stop loss coverage.
Stop loss coverage provides protection for employer-sponsored benefit plans from two types of risk:
- The risk of large individual, or specific claims on any one person, and,
- The risk of claims of high frequency, or the aggregate of all claims.
These are real exposures and can be mitigated, or managed with the inclusion of the appropriate level of Stop Loss coverage.
A few basic definitions:
- Stop Loss—Contrary to what many whom are not familiar with self-Funding, including many state insurance regulators, Stop Loss coverage is NOT individual coverage. Stop Loss Coverage is insurance protection an employer or plan purchase to protect itself and limit exposure to two types of claims—specific and aggregate.
- Specific Stop Loss—coverage designed to protect Self-Funded plans against large, catastrophic claims on any one person during the plan year.
- Aggregate Stop Loss—coverage designed to protect the plan against the total of all claims during the plan year—much like an umbrella.
Even the largest employers are purchasing high levels of specific coverage to protect their plans against the “jumbo” claims that can occur in a larger population. Most of our clients are much smaller and have Aggregate coverage with “monthly accommodation” features that limits the exposure to a pre-determined amount. We can sort that all out for you, depending on the needs of your plan, and make sure you have the coverage best suited for the risk your plan may face.
USA Business Choice Patriot uses A+ carriers and our standard contract is a 12/21, or incurred in 12 and paid in 21 months, 9 months after any claims actually happened. This provides protection for groups that may no longer be candidates for Self-Funding due to demographic or risk profile changes.
If you have any other questions on this or any other topic relating to Self-Funding, let us know!