Stop-Loss Insurance Basics - What Every Broker and Employer Should Know

As more employers shift toward self-funded healthcare plans, stop-loss insurance has become a critical tool for managing risk. Yet, many brokers struggle to clearly explain how it works, when it’s needed, and why it matters. In this post, we’ll break down the fundamentals of stop-loss insurance, helping brokers confidently guide clients through self-funding decisions with clarity and strategy.

What Is Stop-Loss Insurance?

Stop-loss insurance protects self-funded employers from catastrophic or unexpectedly high healthcare claims. It kicks in when claims exceed a certain threshold, ensuring the employer isn’t solely responsible for unusually large medical costs.

There are two primary types:

• Specific Stop-Loss: Protects against high individual claims.
• Aggregate Stop-Loss: Covers total claims for the group exceeding a preset limit.

Together, these coverages provide a financial safety net, making self-funding a viable option for more mid-sized employers.

Why Stop-Loss Coverage Matters

Stop-loss coverage plays a pivotal role in making self-funded healthcare plans both viable and sustainable, especially for mid-sized employers. Here’s how it adds value:

• It brings predictability to the unpredictable. Even the healthiest populations can encounter unexpected medical events, like a serious car accident, a complicated labor and delivery, or a sudden cancer diagnosis. These high-cost claims can happen to anyone, and stop-loss coverage helps protect your plan from their financial impact
• It supports smarter financial planning. With defined claim caps in place, employers gain greater control and peace of mind, knowing their financial exposure is limited and manageable.
• It builds confidence in making the switch. For many employers considering self-funding, stop-loss coverage is the key enabler. It transforms uncertainty into opportunity, making the transition from fully insured plans feel not only possible but strategic and attainable.

Common Misconceptions About Stop-Loss Insurance

Stop-loss coverage is often misunderstood, especially by employers new to self-funding. Here are some of the most common misconceptions brokers hear:

• “It’s just like fully insured coverage.” Not quite. While both involve risk mitigation, stop-loss isn’t a traditional insurance product—it’s a reimbursement mechanism that kicks in after claims are paid.
• “Stop-loss only matters for large companies.” In reality, many mid-sized companies (50–500 lives) successfully self-fund with stop-loss protection.
• “All stop-loss policies are the same.” Carriers vary widely in pricing, underwriting practices, disclosure requirements, and reimbursement timelines.

How Stop-Loss Insurance Is Quoted: Key Factors That Shape Your Rate

Stop-loss coverage isn’t one-size-fits-all—quotes are tailored based on a number of variables that reflect your group’s unique risk profile. At EVHC, our quoting process is designed to deliver accurate, competitive rates by evaluating the full picture. Here’s what goes into it:

• Claims and enrollment history (2–3 years): Past performance offers insight into expected risk and volatility.
• Large claimant and 50% reports: These help assess exposure to high-cost claims and ongoing conditions.
• Plan design and census data: Coverage levels, demographics, and geographic spread all influence pricing.
• Requested deductible levels: Your stop-loss attachment point directly affects the premium and the risk-sharing arrangement.
• Network and coverage structure: The care management model and provider network can significantly impact costs.

By gathering this level of detail upfront, brokers can position themselves as strategic advisors, not just product vendors, while helping clients secure stop-loss coverage that’s well-aligned with their needs and budget.

How EVHC Supports Brokers with Stop-Loss Strategy

EVHC offers a full-service approach to stop-loss insurance for brokers and their clients. Our dedicated team handles:

• Bid marketing and carrier negotiation
•  Contract placement and underwriting support
• Timely claims filing and reimbursement tracking
• Integration with PBMs and specialty vendors
• Detailed monthly and annual reporting

We leverage long-standing carrier relationships and superior data to secure competitive rates and faster turnaround times, all while simplifying your workload.

Why Brokers Choose EVHC for Stop-Loss Strategy

In today’s unpredictable healthcare landscape, stop-loss insurance isn’t just a nice-to-have, it’s essential. Brokers working with self-funded clients need more than a basic understanding of coverage; they need a strategic partner who can help them deliver long-term value.

That’s where EVHC comes in. We offer:

• Preferred Carrier Access: Our panel includes top-rated stop-loss carriers, such as Sun Life, Anthem, Cigna, HMIG, and Tokio Marine HCC, ensuring competitive rates and strong financial backing.
• Cost Containment Expertise: From high-quality disclosures to clinical oversight, we help drive down rates and improve underwriting outcomes.
• Broker-Centric Support: Whether you’re quoting a new group or managing ongoing claims, our team is with you every step of the way—simplifying the process, accelerating timelines, and strengthening your client relationships.

If you’re ready to guide clients toward a smarter, more sustainable healthcare funding model, EVHC is here to support you.

 

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