What is stop loss insurance and do I need it?

Seeking alternative funding plans or self-insuring can put businesses at greater risk of taking a big financial hit. Stop loss insurance can help mitigate that risk.

Stop loss insurance protects businesses against the unknown. But stop loss should do more than just cap your risk. It should add value to your healthcare experience.

What is stop loss insurance?

According to the Spencer James Group, Inc., stop loss insurance is “a financial and risk management tool for businesses.” It is not health insurance, but rather a complementary insurance that works hand-in-hand with medical coverage.

Stop loss can be broken down into two types:

  • Individual stop loss insurance protects an organization against one individual’s catastrophic claims.
  • Aggregate stop loss insurance offers protection when an entire group’s healthcare claims exceed expectations.

Who should have stop loss?

Businesses or employers who forgo traditional health insurance or benefit plans and instead self-insure should consider stop loss. Self-insuring can offer more flexibility or cost-savings, but it also dramatically increases your risk. Stop loss can be the solution. It acts like an additional layer of protection against potentially catastrophic claims by limiting your financial risk and paying an amount over your deductible.

For example, of the alternative funding plans that Anthem offers, the self-funded Administrative Services Only (ASO) plan is the most common. The costs for an ASO are significantly lower than a fully insured plan, but monthly costs are not fixed in an ASO. An ASO plan is recommended for large groups with the financial resources to tolerate fluctuations in monthly claims costs. Pairing an ASO with a stop loss plan helps alleviate the greater financial risk of a self-funded plan.

Why is stop loss becoming more important?

Many factors can affect your need to limit financial exposure, especially in healthcare:

  • Overall healthcare costs are rising and becoming more volatile.
  • High-cost claimants are increasing in number.
  • The Affordable Care Act’s removal of lifetime limits exposes self-insured plans to higher financial risk.
  • The cost of specialty drugs for chronic conditions is steadily increasing.

Take cancer as an example. Cancer is the costliest health condition, and just one case can capsize an organization’s healthcare projections. Each year, Americans spend nearly $150 billion on cancer care, and the cost continues to rise. In a 2018 report, 11 out of the 12 FDA approved cancer drugs were priced above $100,000 annually.

If your company is self-insured or considering a self-funded plan, stop loss insurance is the protection you need against financial risk of cancer and other major illnesses or healthcare needs.

How can stop loss do more?

Anthem looks at stop loss holistically.

While many carriers limit stop loss coverage to medical claims, Anthem adds pharmacy, with the option to include vision and dental. We can help you tailor a policy that will fit your specific needs, budget, and risk tolerance. And we are focused on controlling costs, simplifying your administrative work, and improving employee outcomes.

You will especially see the benefits when you combine Anthem Stop Loss protection with one of our medical plans. It can streamline your billing and administration, improve cash flow, and protect your business from high-claim costs.

With Anthem Stop Loss, we also can:

  • assume 100 percent of the risk on claims that exceed the stop loss limits.
  • put a threshold on the maximum amount of annual claims costs paid by your business.
  • reimburse faster through an advanced funding option to help with cash flow concerns.

For some organizations, alternative funding plans and self-insuring can be appealing. But the increased financial risk can also be daunting. Stop loss can help bridge the gap, protecting you and your business.

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