Stop-Loss 101: Introduction to Stop-Loss Insurance
Insurance that an employer/plan purchases to protect against catastrophic claims on an individual person:
Aggregate Stop Loss
Specific Stop Loss
Catastrophic Coverage
Max Liability Coverage
What is the primary function of stop-loss/reinsurance?
To pay for inexpensive claims
To cover claims over $1 Million
To provide financial protection to the employer or organization sponsoring the plan
To cover claims under $1 Million
In a self-funded arrangement, what is "risk"?
A board game
Expenses an employer may incur beyond the specific deductible
All medical and pharmacy claims paid by the plan
The chance a plan cannot pay a claim
This chart represents just a guideline for appropriate specific deductible levels.
The larger the expected claims, the larger the specific deductible. Use this chart as a guide when obtaining stop-loss proposals from carriers/Managing General Underwriters (MGU's).
IE: If you are quoting a 500-life group with $4mm in expected annual claims, a $30,000 spec deductible is way too low. On the other hand, if you are quoting a 50-life group with $500,000 in expected claims, a $250,000 spec deductible is way too high.
This chart represents just a guideline for appropriate specific deductible levels.
The larger the expected claims, the larger the specific deductible. Use this chart as a guide when obtaining stop-loss proposals from carriers/Managing General Underwriters (MGU's).
IE: If you are quoting a 500-life group with $4mm in expected annual claims, a $30,000 spec deductible is way too low. On the other hand, if you are quoting a 50-life group with $500,000 in expected claims, a $250,000 spec deductible is way too high.
The previous chart is just a "guideline" for appropriate Specific Deductible levels, using a Minimum and Maximum Spec Deductible depending on the expected claims of a group/plan. Using the chart, what would be the Minimum and Maximum Specific Deductibles to quote for a 85- Life group expecting $650,000 in claims over the next 12 months?
$25K - $90K
$150K - $200K
$10K - $20K
$5K - $10K
Aggregate Stop-Loss covers what risk?
Plan member claims above the specific deductible
Only high-cost claimants
All combined plan member claims (medical and RX) beyond the Aggregate Attachment Point
Only prescription drug claims
If a plan member is hospitalized for a week, and the total bill equals $78,000, and the plan sponsor has a specific deductible of $35,000, how much will the plan pay, and how much will be reimbursed by stop-loss?
Plan will pay nothing
Plan will pay $78,000 and stop loss will pay $0
Plan will pay only $30,000 and stop loss will pay the rest
Plan will pay $35,000 and stop loss will pay $43,000
What term describes the threshold at which stop loss insurance coverage begins for all member claims?
Premium point
Deductible point
Attachment point
Aggregation point
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