30 Second Insurance Tips©

Tip #316- What Is Stop Loss Insurance?

Larger companies usually self-fund their health plans. Historically, that has not been the case with groups under 50. But that’s changing.
First, fully insured small group premiums continue to rise.
Second, the industry has devised products that limit the employer’s exposure.
Self-funding, by the way, is a misnomer.  Most groups buy stop loss insurance, which in this limited space, we’ll just call a very high deductible.
For example, ABC Widget has a fully insured employee (only) premium of $510/month (basic $3,000 HSA). The appropriate “specific stop loss” attachment point varies from group to group; in this case, we recommended $40,000, with a monthly premium of just $139.80. The difference extrapolated over 33 employees with single and family coverage is huge.
I asked this employer: “If you pay $500,000 of fixed premiums for a fully insured plan and have few or low claims, does the insurer send you a refund?”
“Now think about allocating the same funds differently; $150,000 of fixed costs and $350,000 in a claims fund that you monitor and ‘own’, but without changing your maximum monthly exposure.”

“What (health plan ID) card is in your wallet?”

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