Individual stop loss coverage does what?

Individual stop loss coverage does what?

• A. Covers the entire cost of all claims for all participants.
• B. Limits the plan sponsor's liability for each covered individual in a plan year.
• C. Sets the overall cost of the health plan for the year.
• D. Pays for all preventive care.

Answer: (B)

Stop-loss coverage for individuals protects the plan sponsor by capping how much it will have to pay for any one enrolled person in a policy year. In a self-funded or partially funded plan, the employer is responsible for most claims, so specific (individual) stop-loss provides protection against extremely high costs from a single member. Once an individual’s claims reach the attachment point for the year, the stop-loss carrier covers the remaining eligible costs up to the policy limit, meaning the sponsor’s liability per person is limited to that annual threshold. For example, with an attachment point of 40,000, if a member runs up 100,000 in claims in a year, the stop-loss carrier pays the excess (60,000), and the sponsor would be responsible for at most 40,000 for that person that year. This is distinct from aggregate stop loss, which caps total claims across all participants, and from coverage that would pay for all preventive care.

Stop-loss coverage for individuals protects the plan sponsor by capping how much it will have to pay for any one enrolled person in a policy year. In a self-funded or partially funded plan, the employer is responsible for most claims, so specific (individual) stop-loss provides protection against extremely high costs from a single member. Once an individual’s claims reach the attachment point for the year, the stop-loss carrier covers the remaining eligible costs up to the policy limit, meaning the sponsor’s liability per person is limited to that annual threshold. For example, with an attachment point of 40,000, if a member runs up 100,000 in claims in a year, the stop-loss carrier pays the excess (60,000), and the sponsor would be responsible for at most 40,000 for that person that year. This is distinct from aggregate stop loss, which caps total claims across all participants, and from coverage that would pay for all preventive care.