What is the function of Stop Loss Insurance?

The function of Stop Loss Insurance is to mitigate the risk of catastrophic claims. This type of insurance acts as a safeguard for self-funded health plans by limiting the financial liability of the employer. It protects against excessive or unexpected healthcare costs that could arise from high-cost claims.

To elaborate, Stop Loss Insurance establishes a threshold for claims costs. Once the total claims surpass a predetermined limit, the insurance kicks in to cover the remaining costs. This provides financial security for organizations, ensuring that they can manage the unpredictability associated with large medical claims.

In contrast, covering routine day-to-day claims would typically fall under standard health insurance plans rather than Stop Loss Insurance, which is specifically designed to address the larger, less frequent catastrophic events. Eliminating all insurance premiums is not feasible, as premiums are essential for the functioning of any insurance system. Additionally, Stop Loss Insurance doesn't aim to reduce the number of claims filed; rather, it focuses on protecting against the impact of those claims reaching excessive levels. This is why mitigating the risk of catastrophic claims accurately describes the primary function of Stop Loss Insurance.