What does medical stop loss mean?

Medical stop loss is an insurance policy that reimburses an employer (or other policyholder) for covered medical claims in excess of a specified amount, for a specified group of individuals. Typically, the employer selects the amount beyond which the policy will begin paying claims, known as the policy attachment point. The insurer will then typically reimburse the policyholder for eligible medical expenses that are in excess of this amount.

Medical stop-loss insurance can be used to limit an employer's financial exposure to high-cost medical claims, and can provide budgeting certainty by offering a maximum total medical cost for the covered group. This can be particularly important for smaller businesses, which may not have the resources to self-fund their employee medical plans.

There are different types of medical stop-loss insurance policies available, including:

- Aggregate stop loss: This type of policy reimburses the employer for the total amount of covered medical claims that exceed the policy attachment point, regardless of the number of individuals with high-cost claims.

- Specific stop loss: This type of policy reimburses the employer for a specific amount of covered medical claims for each individual, regardless of the total cost of medical claims for the group.

- Excess stop loss: This type of policy reimburses the employer for any covered medical claims that exceed a specified amount per person and/or total.

Medical stop loss insurance policies can be complex, and it is crucial to understand the terms and conditions of the policy before purchasing it. Factors such as the policy attachment point, the amount of the stop-loss coverage, and the premium costs should all be carefully considered. It can be beneficial to work with an insurance broker or advisor with expertise in medical stop-loss insurance to ensure that the chosen policy meets the needs and budget of the business.