What is Medical Stop Loss?
Stop loss insurance protects self-funded benefit plans against catastrophic or unpredictable losses. Employers who decide to self fund their employee medical benefit plans can greatly reduce costs and maintain control over reserves without reducing coverage. However, self funding still has risks of large catastrophic claims. Stop loss insurance protects employers from that risk by assuming liability of eligible losses that are in excess of an attachment point, or deductible.
What is Self Funding?
Self-funded, or self-insured, employers will pay medical claims as they occur, rather than paying a premium to an insurance company under a fully insured plan. The employer will commonly have a trust fund set up to reserve funds contributed by employees and the employer to pay the claims.
What are the benefits to self funding?
- Employers are free to customize the plan to be as unique as the group it is covering, contracting with the best healthcare providers to suit the needs of the employees.
- Improves employer/ employee relationship
- Control of health plan reserves, which can accrue interest that would go to the insurance carrier under a fully funded plan.
- Improved cash flow
- Administration costs are much lower than insurance carrier overhead
- Employer is not restricted by regulations of different states because the plan is only subject to federal regulation under ERISA
- Exempt from state health insurance premium taxes (typically 2-3% of premium)
- More control over long term costs
How common is self funding?
A 2017 Kaiser Family Foundation study found that 60% of U.S. workers with health coverage were in self-insured plans.
With what laws must a self funded plan comply?
Applicable federal laws include:
- Employee Retirement Income Security Act (ERISA)
- Health Insurance Portability and Accountability Act (HIPAA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- Americans with Disabilities Act (ADA)
- Pregnancy Discrimination Act
- Age Discrimination in Employment Act
- Civil Rights Act
- and various budget reconciliation acts such as:
Who administers claims for a self funded group?
Administration can be done in-house or contracted out to a third party administrator (TPA). A TPA can help coordinate stop-loss coverage, process or adjudicate claims, collecting premium, contracting for PPO services, provide utilization review of claims, among other services.
What carriers does J. Allan Hall & Associates work with and what is their rating?
LLoyd’s of London since 2005 with an AM Best rating of A (Excellent), Class XV.
Sirius America since 2010 with an AM Best Rating of A (Excellent), Class XV.