Stop Loss

Dec 17, 2012

Extended health and dental coverage are user benefits.  This means that the employee usage has a direct impact on the pricing of these benefits.  There is a portion of extended health care, however, that is generally fully insured or pooled.  It can be broken down into two parts: emergency out of country coverage and stop loss coverage.

Stop loss coverage is essentially an employer’s way to limit catastrophic risk under extended health insurance.  Claims up to the stop loss limit have a direct effect on claims experience. Claims over the stop loss limit are pooled.

There are different methods that insurance carriers use to limit an employer’s exposure. The stop loss limit can be set as a  maximum per covered person under a program or at an aggregate amount per certificate.  Some carriers even may provide a hybrid of the two methods.  For example there may be the lesser of a $10,000 stop loss per covered person or $25,000 per covered certificate.

It is important to review your stop loss amounts and be very clear how they may impact your benefit program.  With more and more expensive drugs entering the marketplace, there is much greater risk of employees and their dependents reaching these stop loss amounts and driving the cost of insurance.

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