Stop-Loss insurance for Self-Insured Business
Employer-sponsored health plans fall into one of two categories: fully insured or self- insured. In a fully insured plan, an employer pays a health insurance company for health coverage for its workers. The insurance company is responsible for the costs of catastrophic or unpredictable claims made by employees. These are any health care costs that are higher than the amount of the monthly premium, deductibles, or co-pay fees.
In self-insured plans, the corporation is financially responsible for all healthcare costs that exceed the employee’s contribution to their own healthcare. Companies that have over 1,000 employees are more likely to have a self-insured plan though an increasing number of companies below that size are exploring elf-insurance options. Usually the employer will contract with a third party that specializes in administering health claims. About 60% of all insured American workers are in self-insured plans.
Stop-loss insurance is a term for a secondary private insurance plan purchased by self- insured businesses to protect themselves from catastrophic employee healthcare claims. About 60% of all self-insured companies carry stop-loss insurance, which makes the company providing the stop-loss policy responsible for the cost of healthcare claims that exceed a predetermined amount. ‘Specific’ or ‘individual’ stop-loss plans protect the company against unusually high charges from one individual employee. Aggregate stop-loss insurance limits the total amount the employer must pay each year for all employee healthcare claims. Employers may purchase one or both types of stop-loss plans.
An attachment point is the financial threshold at which costs are shifted away from the employer to the stop-loss insurer. Lower attachment points represent lower financial risk for the employer and higher premium expenses for the stop-loss policy. If a stop-loss policy had a $100,000 attachment point, the employer is responsible for the first $100,000 in employee healthcare costs during the year and the stop-loss insurer is responsible for expenses exceeding that amount.
Attachment points vary between insurance companies and the different types of plans they offer. Unless prohibited by individual state law, an insurer may offer stop-loss insurance policies with attachment points set low enough so that the insurer assumes nearly all the financial burden. California, Rhode Island and Minnesota are currently considering legislation in which attachment point levels would be mandated by state law.
Generally, employers that purchase stop-loss plans and the insurance companies that sell the plans are not subject to the mandates of the Affordable Care Act (ACA), sometimes called Obamacare.http://www.benefitspro.com/2013/08/06/self-insurance-a-threat-to-obamacare?t=cost- containment&page=2http://www.gpo.gov/fdsys/pkg/FR-2012-05-01/pdf/2012-10441.pdf