Stop-Loss Insurance

To protect the employer against claims exceeding a predetermined threshold in a plan year — In a self-funded plan, the employer pays claims from its own funds and bears the risk of high claims. Stop-loss insurance caps that risk: the insurer reimburses the employer for claims that exceed a specific dollar level per individual, or a total aggregate level for the whole group in a plan year. This lets the employer keep the flexibility of self-funding while protecting the business from catastrophic loss. Stop-loss is not a health benefit for employees; it is a risk-transfer tool for the employer, and its terms are negotiated between the employer and the insurer.

National insurance concept

Cap the employer's liability for high-cost claims beyond a chosen attachment point — A self-funded employer pays employee health claims directly and therefore bears the risk of unexpectedly high or catastrophic losses. Stop-loss insurance protects the employer by reimbursing claims that exceed a selected attachment point: specific stop-loss caps the exposure on any single individual's covered claims, while aggregate stop-loss caps the employer's total claims for the plan year. This risk-transfer layer is what makes self-funding financially feasible for large employers, so A correctly identifies the purpose of the stop-loss coverage the employer purchases.

National insurance concept