Stop-Loss Insurance

Stop-loss insurance is what makes self-funded health plans safe for employers below a few thousand employees. It's a policy that reimburses the plan when claims exceed defined thresholds. Two types work together: specific stop-loss caps the plan's exposure on any one member (say $50,000 or $100,000 per person per year), and aggregate stop-loss caps the plan's total annual claims spend at a percentage above expected.

Without stop-loss, one catastrophic claim — a NICU baby, a gene therapy, a major cancer case — could bankrupt a small employer's health plan reserves overnight. A $2.1 million hemophilia claim is a real number, not a hypothetical. Stop-loss premiums typically run 15 to 30 percent of total plan cost for small self-funded groups, less for larger ones with more predictable claims. Carriers writing stop-loss include Sun Life, Symetra, Tokio Marine, and the big carriers' stop-loss divisions. The specific deductible, aggregate corridor, contract basis (paid vs. incurred), and laser provisions are the four levers to watch in a stop-loss contract.

The takeaway: for any self-funded employer under about 5,000 lives, the stop-loss contract is the single most important document in the plan. Reprice it every year — the market is competitive and rates move.