Examples of Stop-Loss Insurance
Among small to mid-sized enterprises, self-funded healthcare models are becoming increasingly appealing—especially as healthcare costs continue to rise, escalating premiums and deductibles as well.
This continual creep in costs has made healthcare exceedingly expensive for employers, forcing many to consider cutting back on the healthcare they provide employees. Self-funded healthcare plans offer employers a viable alternative to traditional private insurance that can help lower healthcare spend without sacrificing the level of care provided.
One of the risks that comes with an employer’s decision to cover medical costs in-house is the potential for disastrously expensive medical claims. Luckily, stop-loss insurance offers employers with self-funded healthcare plans some protection from such catastrophic claims. If you’re an employer looking for stop-loss insurance examples, this blog has you covered.
Stop-Loss Insurance Examples
Now that we have elaborated on the definition of stop-loss insurance, we can look more closely at some specific types of stop-loss insurance. Stop-loss insurance comes in two forms, each designed to fill a specific role. The two types are:
- Individual stop-loss. Sometimes referred to as specific stop-loss, individual stop-loss insurance provides high-claim protection for any single individual. Rather than protecting against frequent claims, it protects against individual, high-cost claims.
- Aggregate stop-loss. Aggregate stop-loss creates a ceiling for expenses for which an employer would be responsible during an agreed-upon contract period. In comparison to individual stop-loss, it protects against a frequency of claims instead of single, high-dollar claims.
Typically, employers with self-funded healthcare plans should use both types of stop-loss insurance. Each type offers protection the other doesn’t; together, they offer employers more protection.
Under an individual stop-loss policy, an employer might take out a $30,000 threshold of liability for a single employee over a specific contract period. If the employee develops a severe illness and files medical claims that exceed this threshold within the contract window, the stop-loss insurance policy would protect the employer from claims exceeding $30,000.
However, if a group of employees—including the employee with an individual stop-loss plan—all have catastrophic claims within the policy window, the employer will only be reimbursed for claims made by the employee covered by individual stop-loss.
If the same employer also had an aggregate stop-loss plan, it would have covered the company for claims exceeding the negotiated threshold and reimbursed them for the excess.
|INDIVIDUAL Stop-Loss Plan
||BOTH Individual & Aggregate Stop-Loss Plans|
Total = $45,000
Total = over $250,000
It’s important to note that employers with self-funded healthcare plans are still responsible for paying employee medical claims. However, stop-loss insurance will reimburse them for amounts exceeding their policy threshold.
Who Can Benefit From Stop-Loss Insurance?
Now that you’ve seen some examples of stop-loss insurance, it should be easier to understand why employers who have begun self-funding their employees’ healthcare stand to benefit from stop-loss insurance policies. While self-funded plans can save employers from paying exorbitant premiums and deductibles, they can still be vulnerable to high-cost claims.
Employers with stop-loss insurance can rest easy, knowing they are saving money with a self-funded healthcare plan while also mitigating the risk of being responsible for excessively expensive claims.
This allows employers to focus on what matters the most: ensuring the health and well-being of valuable team members—and, by extension, their organization as a whole.
For employers who have not yet switched to self-funded healthcare, but are interested in how to save money and improve the quality of employee care, you’ll want to partner with someone who understands the ins and outs of the healthcare industry.
How 6 Degrees Lowers Healthcare Costs
At 6 Degrees Health, we are not an insurance company. Instead, we offer powerful cost-containment solutions that eliminate the constraints of traditional healthcare models and outdated billing practices. Paired with stop-loss insurance, we can help you configure plans to lower healthcare costs and protect your organization from catastrophic loss.
With our reference-based pricing solution (RBP), we offer a self-funded healthcare reimbursement model that utilizes state-of-the-art benchmarking software to negotiate reasonable payments for medical services. This RBP solution can wrap around existing health insurance or provide a complete network replacement. With 6 Degrees Health as your partner, you could save up to 40% on your healthcare spend.
Want to learn more about stop-loss insurance examples? Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.
Looking To Lower Your Company Healthcare Coverage Cost?
As a service-first cost containment company, 6 Degrees Health is here to help employers and employees navigate a historically opaque healthcare system to pay only what is fair.