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Over the past ten years, healthcare costs have risen steadily each year as treatment and care options have become more sophisticated and advanced. As a result, corporate health insurance buyers are looking for more effective solutions to manage their healthcare spend, which is their biggest cost behind payroll.
For employers who choose to self-fund their health insurance programs, employer stop-loss insurance protects those groups against large or catastrophic claims, as an alternative to traditional group health insurance and benefits plans. The medical stop-loss insurance sector has experienced dramatic growth in recent years as more employers migrate to self-funded health insurance programs, which offer customizable coverage for employees with disciplined cost containment oversight.
Karthik Mohan, vice president of sales & distribution for the medical stop-loss group at Liberty Mutual Insurance, outlines how medical stop-loss insurance can help organizations keep pace with medical inflation.
The value of medical stop-loss insurance for self-funded health insurance programs
Today, approximately 61% of U.S. employers self-fund their health insurance programs, according to the Kaiser Family Foundation’s 2019 Employer Health Benefits Report Annual Survey. Frequently, those same employers purchase medical stop-loss insurance, which is a financial management tool that transfers the liability risk arising from large, unexpected claims, like cancer treatments, new therapies for complex conditions, and organ transplants, to an insurance carrier – sparing the employer from unpredictable, catastrophic medical claim costs that can materially impact an organization’s cash flow and bottom line.
Medical stop loss insurance is typically offered with two types of deductible options:
- Specific Stop Loss, or “Spec” deductible, for individual stop loss insurance. Coverage protects the self-insured employer in the event of a severe or significantly costly claim for an individual member of the group plan receiving the care, such as a rare cancer condition, new drug treatment or gene and cell therapies
- Aggregate Stop Loss, or “Agg” deductible, for group claims. Coverage protects the self-insured employer that experiences medical claims under the group plan that exceed the cap placed on the policy term for the coverage.
Under these programs, the stop loss insurance carrier reimburses the employer for healthcare financial losses above the contractual policy deductible limit.
