Stop-Loss Insurance
What Does Stop-Loss Insurance Mean?
Stop-loss insurance is designed to protect an employer from significant financial loss due to medical claims made by employees. It works by covering medical expenses after the employer has reached a specified amount of spending. There are two types of stop-loss policies: individual and aggregate.
Insuranceopedia Explains Stop-Loss Insurance
If an employer chooses not to purchase group health insurance for employees, stop-loss insurance can help protect against significant financial loss due to medical expenses. This is achieved by setting aside a portion of the employer’s income for employee healthcare and purchasing a stop-loss policy. The employer and the insurance company agree on a fixed deductible amount. When an employee files a medical claim, the insurance company covers the costs that exceed the deductible.
An individual stop-loss policy covers an employee’s medical claims that go beyond the agreed financial limit, while an aggregate stop-loss policy covers the total medical claims of all employees that exceed the deductible or financial limit.
