Stop-loss is a common phrase used in the health insurance industry, but what exactly does this entail? Any time you have a self-funded or self-insured plan, your employer will also have stop-loss insurance to cover medical expenses during catastrophic events. A traditional insurance broker quotes stop-loss coverage through an underwriter, which provides additional coverage protecting the employer group or employer from being responsible for claims costs that extend beyond a specified amount.
A Closer Look at the Two Types of Stop-Loss in Health Insurance
In a traditional broker model, there are two major types of stop-loss insurance an employer or employer group may carry. However, stop-loss as a concept is far more in-depth than just two standard plans from which to choose. Stop-loss should be an intrinsic factor of claims and costs—if claims and costs are higher, stop-loss coverage must be greater. Within a transparent pricing model, as opposed to a traditional plan, you can reduce claims costs and incorporate a transparent pricing model. This leads to reduced liability covered by stop-loss, and the coverage itself becomes less expensive. Here is a closer look at the two major stop-loss insurance plans generally available, and what the coverage entails.
Specific Deductible Plans
Specific deductible stop-loss insurance is one type of policy. With a specific deductible plan, each employee has a preset amount of money that the employer can spend on their claims. The employer then would not be liable to pay for claims costs beyond that predetermined deductible. For example, if a member of the employer group has $200,000 in claims and the employer purchased a $100,000-specific deductible plan for that employee, the stop-loss policy would pay the costs over $100,000.
Aggregate Deductible Plans
An aggregate deductible, oftentimes referred to as an ag deductible, involves the total liability the employee owes to the employer. For instance, if the employer has some employees with small claims and some employees with big claims, these costs would be added together and could not exceed the aggregate deductible reached. Ultimately, that aggregate deductible may be several million dollars. Basically, the aggregate deductible would be considered their maximum expense risk because the policy would kick in and pay for expenses after cumulative claims costs reach a certain point.
“What’s Your Stop-Loss?” Is Not the Biggest Concern with Health Insurance Quotes
Stop-loss coverage is important when it comes to overall employer or employer group costs. However, it is actually more imperative to look at the real cost drivers of an overall plan. In a plan focused on transparent pricing and customized to an employer group as opposed to a traditional plan, an employer group will likely see a dramatic reduction in overall claims costs. In turn, this leads to the possibility of lower stop-loss coverage limits and lower investment costs for stop-loss premiums.
When it comes to traditional brokers and stop-loss insurance, most health insurance brokers are comparing an existing plan with similar options in an effort to reduce costs to some degree. This generally only may lead to cost reductions of a few percentage points. By contrast, a plan with transparent pricing offers benefits that may reduce employer costs by as much as 30 percent.
Find Out More About How ClearChain Health Reduces Stop-Loss Premiums
With clear-cut pricing models so employers know precisely what they will be spending per employee enrolled, stop-loss coverage premiums may be reduced substantially. If you would like to know more about ClearChain Health as an employer, feel free to reach out to us for more information.