Stop-loss insurance is a policy an employer buys in connection with a self-funded or level-funded health plan. It reimburses the employer, or the plan, when covered claims exceed a set amount. That amount is called an attachment point.
The U.S. Department of Labor has described how this works. The contract can cover claims costs that exceed an attachment point for a single enrollee, for aggregate claims over a period, or both. The employer remains responsible for claims below those attachment points. Stop-loss insurance generally protects the employer against losses. It does not usually guarantee the payment of benefits to plan participants.
That last point is the one employers should keep in view. Stop-loss is not a second health policy for employees. Employees’ benefits are determined under the employer’s plan. If a claim is covered by the plan but is not reimbursable under the stop-loss contract, the employer can still be responsible for the plan benefit.
Ares Benefit Group advises businesses of every size, from 2 employees to 500+. Small-business coverage remains the core of the practice. Stop-loss becomes a central contract when a mid-size or large employer — including groups in the 51–200 and 201+ ranges — funds claims itself, or uses a level-funded arrangement that includes stop-loss in the monthly amount.
Specific and aggregate coverage
Most employer stop-loss contracts are built from one or both of the following:
Specific stop-loss. The policy reimburses amounts that exceed a set attachment point for claims on a single person during the contract period. The specific attachment point is a dollar figure in the contract. It is not a deductible in the employee’s medical plan, and it should not be described to employees as if it were.
Aggregate stop-loss. The policy reimburses amounts that exceed a set attachment point for the group’s claims as a whole during the contract period. The aggregate attachment point is often expressed in relation to expected claims for the year, on terms the contract defines.
A plan may use specific coverage, aggregate coverage, or both. Which combination is offered, and at what attachment points, depends on the census, the claims history, the stop-loss carrier, and the state rules that apply. We will not print a “typical” attachment point on this page. Those figures belong to a quote.
Some contracts also set a different specific attachment point for a named person. That is a contract term to be read in advance, with a clear understanding of how it affects the employer’s exposure. It does not change the benefits the plan owes that person.
How stop-loss is used with each funding design
In a traditional self-funded plan, the employer pays covered claims as they come in, plus administration fees, and looks to the stop-loss policy when claims pass the attachment points. Cash flow during the year is therefore a claims-and-reimbursement pattern, not a single premium.
In a level-funded arrangement, stop-loss is one of the three parts of the fixed monthly amount, together with a claims fund and administration. The monthly amount is designed to stay level during the plan year. The stop-loss contract is still what limits exposure if claims run higher than the funded amount, and only for claims the stop-loss contract actually covers.
In a fully insured large-group policy, the insurer’s premium is what covers the claims risk under that policy. The employer is not usually buying a separate stop-loss policy for those medical claims. Fully insured coverage remains the right answer for many companies. When we compare structures, stop-loss terms are part of the self-funded and level-funded side of that comparison, not a reason to set fully insured coverage aside.
Contract terms that have to be read
The value of a stop-loss policy is in the contract, not in the name of the product. Before anyone binds coverage, we review at least the following with you:
- The specific and aggregate attachment points, and what happens if a claim is not covered by stop-loss
- The period in which claims must be incurred and paid in order to be eligible for reimbursement, including any run-out period after the policy year ends
- Disclosure obligations about known claims at placement, and how a failure to disclose is treated
- Any different attachment point that applies to a named person
- How reimbursements are requested, how quickly they are paid under the contract, and who files them — the employer or the administrator
- Terminal or run-out options if the plan changes administrators or funding methods at year-end
- State rules that apply to stop-loss sold to employers of your size, which vary and can affect whether a contract can be issued at a given attachment point
If claims for the year come in below the amount funded in a level-funded contract, some contracts provide that unused claims funding may be returned or credited. That is a contract term, not a federal rule, and it is not guaranteed. Treat it as language to be read, not as an expected refund.
We will not use a savings percentage, a typical surplus figure, or a claim that a plan with stop-loss is “cheaper” or “safer” than a fully insured policy. Those words, if they belong anywhere, belong to a specific quote and a specific contract.
State rules and the rest of the plan
Stop-loss is an insurance contract, and states regulate it differently. Some states set standards for attachment points, especially when stop-loss is sold in connection with smaller groups. Availability for a company just above — or still below — 50 employees is a fact to be checked, not assumed. The mid-size page covers the related market-definition questions.
Because stop-loss generally does not pay employees directly, the employer’s plan documents, claims procedures, and notices still have to stand on their own. ERISA duties, COBRA administration where it applies, and, for many employers in this size range, ACA affordability, minimum-value, and information-reporting work remain part of the year. Employee benefits consulting describes how we support that work around the medical plan.
Our agents are licensed in all 50 states. The firm is based in Tampa and works with Tampa Bay employers as well as companies with people in other states.
Talk with an advisor: (813) 540-1299For one carrier's published stop-loss offering, see Sun Life stop-loss. We help you compare the contracts that can actually be issued; we are not appointed by or endorsed by any stop-loss carrier.
Frequently asked questions
Is stop-loss the same as a health insurance policy for employees?
No. It is generally coverage for the employer in connection with a self-funded or level-funded plan. Employee benefits are determined under the employer’s plan. The Department of Labor has noted that stop-loss insurance does not usually guarantee payment of benefits to participants.
Do we need both specific and aggregate stop-loss?
Not automatically. Many employers use both; some contracts are issued with one or the other. The right combination depends on the census, the claims profile, the carrier’s offer, and the employer’s tolerance for remaining exposure. We will review what can actually be issued.
If we have stop-loss, are we still self-funded?
Generally, yes. A self-insured plan that buys stop-loss remains a self-insured plan. The Department of Labor’s guidance on this structure treats stop-loss as protection for the employer, not as a conversion of the plan into a fully insured policy.
Can stop-loss be used with a fully insured large-group plan?
A fully insured policy already places the claims risk on the insurer under that policy, so a separate medical stop-loss policy is not the usual structure. Stop-loss is the contract we review in connection with self-funded and level-funded designs.
Will you quote an attachment point on this website?
No. Attachment points are set in a specific contract, for a specific census. Publishing a “typical” number would not be accurate and would not help you.
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