Stop-loss insurance is a crucial component of Administrative Services Only (ASO) benefit plans, designed to protect self-insured employers from excessive financial risk associated with healthcare expenses for their employees. It helps mitigate the risk of unforeseen and high healthcare expenses while allowing employers to tailor coverage to their specific needs and budget. This insurance safeguards the financial stability of organizations while providing flexibility and control over their healthcare benefits programs.
Stop-loss insurance is a risk management tool used by self-insured employers to limit their exposure to high healthcare costs. It provides a safety net by reimbursing the employer for claims that exceed pre-determined thresholds, as self-insured employers assume the financial responsibility for their employees’ medical & dental claims, paying these costs out of their own budget rather than relying on premiums paid to an insurance company.
Thresholds
Stop-loss insurance typically consists of two thresholds: the individual (specific) threshold and the aggregate threshold. The individual threshold sets a maximum limit on how much the employer must pay for an individual employee’s healthcare claims in a policy year. The aggregate threshold establishes an overall limit on the total claims amount for all employees combined. These thresholds are set at time of implementation and evaluated annually, based on the claims incurred and paid over the previous policy period.
Benefits of Stop-Loss Insurance for ASO Benefit Plans
- Financial Protection: Stop-loss insurance shields self-insured employers from unexpected and catastrophic healthcare expenses, ensuring they can manage their budget more effectively.
- Budget Predictability: Employers can better forecast healthcare expenses as they know the maximum liability they may face, due to having stop-loss coverage in place.
- Customization: Employers can tailor their stop-loss coverage to align with their unique risk tolerance and budgetary constraints, within certain parameters.
- Enhanced Risk Management: Stop-loss carriers and Third Party Administrators (TPA’s) provide expertise in claims data analysis, helping employers identify cost-saving opportunities and improve employee health outcomes.
Cost Considerations
Premiums for stop-loss insurance are based on factors like the selected thresholds, the number of covered employees, and the historical claims experience of the group. Employers need to strike a balance between the level of coverage and the associated premium costs. Canadian Benefit Providers has partnered with Lionsgate Underwriting and BMS Group to provide the highest level of coverage at a reduced cost to our clients.
