Today, many businesses or employers choose to self-fund help plans of their employees primarily due to three possible benefits, which are, plan flexibility that enables employers to adopt flexible coverage according to the type of employee. Another benefit is the improved cash flow wherein the claims and payment are settled quickly and more efficiently. The third and most important benefit for employers is the potential savings in terms of reduced premium taxes. Besides, an employer can claim insurance funds if the claims are lower than expected.
Now, in return for these benefits an employer or business takes on the responsibility of not only insuring the medical expenses of his employees, but also of their families. The employer accepts an increased amount of risk and is liable for all claims which include those that overrun or exceed the expected amount. Stop loss insurance comes to the help of such employers and businesses by limiting the associated risks, at the same time enabling them (employers and businesses) enjoy the benefits of self-funded health plans.
Understanding Stop Loss Insurance
In the case an employer opts for self-insurance, he is expected to pay a certain calculated, predetermined amount to the insurance company and thereafter, the insurance company which provides the stop loss pays the employees’ medical bills. There are special insurance policies that are designed to protect the employer from tall claims made by a particular employee or any family member. Once the employer deposits the predetermined amount with the insurance firm, it takes complete care of subsequent claims against the policy’s coverage limit. Some of the policies also protect the employer in event of claims of really unexpectedly large amounts. However, in all the schemes and plans the predetermined coverage limit, set by the employer and the company, applies. It is true that stop loss offers great financial protection while dealing with this support insurance, the employer is bound to offer employees, but it is also necessary to thoroughly weigh the pros and cons and the cost against potential benefits.
The kind of stop loss required by a business is largely determined on the basis of the risk exposure. If it is low, where most employees are a young, healthy lot, the employer could opt for the ‘self-insurance-without-stop-loss insurance’ protection. On the other hand, if the estimated claims the employer is likely to pay and the premium calculated by the insurance company executives is on the higher side, then it is lucrative to invest in the group-insurance-plan-with-stop-loss-insurance that covers the employees and their families. Depending on the employer’s calculations and predicted insurance requirement, he or she needs to identify and invest in a good insurance company that makes the stop-loss insurance available, with the specialized products.
Types of Stop Loss
- Specific Stop Loss: When an insurance claim reaches the threshold set or chosen by the employer, coverage is initiated and the stop-loss policy would pay claims up to the lifetime limit per employee for the self-insurance medical plan.
- Aggregate Stop Loss: In this type of insurance, coverage is initiated when the employer’s self insurance total group health claims reach a stipulated limit set or selected by the employer. Generally, this selected threshold is 125% of the self insurer’s annual estimated group health claims cost. The estimates and calculations are offered by professionals like leading consultants, brokers and TPAs.
The stop loss insurance supports employer and employee needs via unlimited access to the industry’s top-rated services and competitive premium rates. Today, thousands of employers all over the world, both public and private, are reaping the benefits of partnerships with such insurance companies and their trusted advisers. The companies handle consulting requirements and municipal risk pools to reach out to public entities. Such insurance coverage enables employers to provide health benefits to their employees and dependents and take on risk safely. This coverage is designed to step in and salvage a business situation arising from complex and high-cost claims, serious illness, essential organ transplants and even the treatment of genetic disorders.