Fortunately, there's a solution to this problem: stop-loss insurance. Stop-loss insurance allows businesses of all sizes to make use of alternate medical plans like self-funded health insurance.
What Is Stop Loss Insurance?
Stop-loss insurance provides protection against extremely high insurance claims made by employees. The interesting thing is that, what actually qualifies as “extremely high” can and will vary based on how much risk your business is comfortable with carrying on your own. You control the risk and how to allocate it to your comfort zone. Your Stop-loss insurance policy will be directly designed to protect you, as the health plan sponsor, from having to pay higher than expected health insurance claims. It’s a “back-up plan” and most of the time, your employees don’t even know that it exists.
There are two types of stop-loss insurance: specific and aggregate.
- Specific Stop-Loss - This provides protection against catastrophic claims made by any single individual. Essentially, if someone in the office were to need an extremely expensive procedure, specific stop-loss would kick in and limit your liability.
- Aggregate Stop-Loss - Aggregate stop loss is meant to protect against an unusually high frequency of claims, not against any individual claim. This would kick in if a high number of people in your office were to require procedures in a short period of time.
Again, the exact numbers where the insurance would kick in vary from plan to plan and can be customized to the employer’s comfort zone.
Why Stop-Loss Insurance Is Important
The importance of stop-loss insurance comes down to one thing: risk. Health situations can happen no matter how young, healthy, or cautious your workforce skews. Although it may be unlikely, there are cases where a single claim can stretch into the hundreds of thousands of dollars range, even with only a few dozen employees. That's way too much risk for some businesses to take on alone. So, it's obviously extremely important to have a form of stop-loss if you're going to be funding your own medical plan. What's equally important is that you get high-quality insurance.
Good Vs. Bad Stop-Loss Insurance
As with most insurance, not all stop-loss plans are created equal. Some will kick in earlier than others, some will only cover you up to a certain amount, and some carve out or laser certain occurrences. It's important that you consider your tolerance for risk and seek the help of an adviser who specializes in self-funded medical insurance and stop loss protection. Things to ask yourself would be; Do you need protection from specific and aggregate claims or would just one be enough? How much risk can you afford to carry yourself? The bottom line is that your adviser can help you figure out your comfort zone and design your stop loss protection to keep you with in.
Self funding their group medical program can save many employers a lot of money when it comes to providing a viable health plan for their workforce. It’s less costly to administer, you remove certain profit centers from taking advantage of the dollars you are investing to the plan, you get more flexibility in plan design, and more. As a mid-size employer, you shouldn’t shy away from this option because you are afraid of the risk. Just use stop-loss insurance to help you maintain a program you can manage long term. It could be a tremendous asset to you.
Summerlin-Roberts are experts in cost containment. We work with you to find creative ways to bring quality care to employees — without breaking your budget. For more information about providing affordable health insurance that is also satisfying for your employees, please contact us today.