What is stop-loss insurance? A guide for self-funded employers

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Self-funded health insurance benefits — whether you’re a smaller, family-owned business or large corporation — don’t come without risk. Your employees may be relatively healthy, but a sudden medical diagnosis could lead to higher-than-expected medical costs. That’s when stop-loss coverage can help.

Stop-loss health insurance explained

Stop-loss insurance isn’t medical coverage — it’s a financial and risk management tool for your business that caps what you pay toward your employees’ medical expenses at an agreed amount. Any services covered by your medical plan above that threshold are typically covered by the policy, unless the incurred date and paid date of claims fall outside a stop-loss period.

Stop-loss insurance helps protect your business from major, unexpected medical costs that could, at best, put a large dent in your cash flow — and, at worst, affect major business operations or put some companies out of business. While the insurance reimburses employers when costs rise above the set limit, as a self-funded plan sponsor you’re typically still responsible for initially paying medical expenses in full.

Two different policy options for your business

There are two different policy options for stop-loss coverage: individual and aggregate.

• Individual stop-loss insurance protects you from higher-than-expected claims by your individual employees.
• Aggregate stop-loss insurance protects you from higher-than-expected claims by your entire member population.

Gain more stability with stop-loss insurance

If you have a stop-loss policy with Wellmark Blue Cross and Blue Shield, you have several different billing options to suit your specific financial situation. You can choose to have a monthly statement with stop-loss credits settled at the end of every month, or choose to withdraw either a set amount or an actual claims amount every week.

A weekly billing method offers stability and consistency in your stop-loss coverage. For example, if you have an individual member claim of $250,000, and an individual stop-loss amount of $100,000 on a typical stop-loss plan, you’d pay the $250,000 up-front and get $150,000 reimbursed at the end of the month. Wellmark’s newest billing option debits weekly claims up to your stop-loss amount, which is when your policy handles the rest — and you don’t have to wait to be reimbursed.

Have questions or want to learn more about Wellmark’s stop-loss policies? Talk to your Wellmark representative or email us at blueatwork@wellmark.com.