STOP-LOSS (EXCESS RISK) COVERAGE

Excess-risk coverage is insurance sold to sponsors of self-funded health plans to guard against unacceptable losses. There are two types of excess-risk coverage:

• Specific coverage that insures against a single catastrophic claim that exceeds a dollar limit chosen by the employer and agreed to by the excess-risk carrier. For example, specific coverage would come into play if one of the covered participants was in a catastrophic accident and had claims that exceeded the agreed upon dollar limit. In this case, the specific coverage would reimburse for that participant's covered expenses beyond that dollar limit.
• Aggregate coverage that insures against all the claims exceeding a specific dollar limit chosen by the employer and agreed to by the excess-risk carrier. If all the claims payable exceed the agreed-upon dollar limit, aggregate coverage would reimburse the excess. Excess-risk coverage protects the plan against unforeseen catastrophic claims that would cost more than is budgeted in the plan and place undue financial burdens on the employer.