Features

Under a self-funded plan, employee health claims are paid directly by the employer or through a trust. However, the employer or trust is subject to the risk of large individual claims, or high incidence of claims on the whole group in the aggregate. Proper design of the self-funded program includes special coverage known as Employer Stop Loss Insurance to protect the plan from these catastrophic claims situations. There are basically two types of Stop Loss Insurance: Specific Stop Loss and Aggregate Stop Loss

This coverage protects the plan from large losses on any one participant who suffers serious accident or illness during the plan year. It accomplishes this by limiting the plan liability on any individual to a specific dollar amount (deductible). If an individual's claims exceeds that dollar amount, the stop loss coverage reimburses the plan for all eligible claims incurred and paid for the remainder of the covered period. Experts in self-funded plans consider Specific Stop Loss to be the primary protection of the plan assets and to be essential to the financial solvency of the plan.

This coverage protects the plan from claims incurred and paid on the entire group over the course of the covered period in excess of the anticipated level. Aggregate Stop Loss is a safety net for the plan as a whole and is helpful for budgeting purposes because it gives a maximum claims cost for the year. Aggregate Stop Loss is priced significantly lower than Specific Stop Loss because it is experience rated, usually has a corridor between expected claims and the maximum aggregate attachment point for the year, and claims above the specific deductible are not considered under the aggregate