What Does Stop-Loss Insurance Mean?
Stop-loss is a type of insurance coverage designed to cover catastrophic claims. When an insurer purchases stop-loss coverage, this secondary policy takes effect only after a specific claim threshold has been reached. Individuals may also purchase stop loss coverage to insure against illness or injuries that exceed their primary coverage limits. With regard to employer-sponsored healthcare coverage, stop loss insurance is most often use to protect the employer and is not issued to individual plan participants. Stop-loss insurance is also referred to as excess insurance.
WorkplaceTesting Explains Stop-Loss Insurance
Stop-loss insurance may be specific, protecting against a catastrophic claim made by a single individual. Or, an employer may purchase an aggregate stop-loss policy which covers any employer healthcare expenses above a predetermined ceiling during a specified period. As the industry has matured, additional types of coverage have also developed. Stop-loss coverage is particularly useful for protecting self-insured employers against catastrophic claims. An employer may choose a less costly primary plan, then purchase stop-loss coverage to hedge against the possibility of an excessively high number of claims occurring during any given time frame. Stop-loss coverage can also be used as a safety net for employers wishing to offer more generous coverage to employees but are worried about over-utilization going over budget.