From the Hotline: Stop Loss Insurance Defined

Question: What is stop loss insurance?

Answer: According to the Department of Labor, stop loss insurance protects against health insurance claims that are catastrophic or unpredictable in nature and provides coverage to self-insured group health plans once a certain level of risk has been absorbed by the plan.

Stop loss protection allows an employer to self-insure for a set amount of claims costs, with the stop loss insurance covering most or all of the remainder of the claims costs that exceed the set amount, generally referred to as the “attachment point.” Attachment points can be either “specific” or “aggregate”:

  • Specific attachment points protect the plan against a high claim for any one individual (e.g., an employer self-insures up to $500,000 in claims per year for any one enrollee and stop loss insurance covers claims amounts above the $500,000 attachment point).
  • Aggregate attachment points define the maximum dollar amount of claims that an employer will pay, in total, during a specific period (e.g., an employer self-insures up to 125 percent of expected claims per year across all employees and stop loss insurance covers claims amounts above the 125 percent attachment point).