Which statement correctly characterizes aggregate stop loss?

Which statement correctly characterizes aggregate stop loss?

• A. It provides coverage for per-person catastrophic claims.
• B. It limits the plan sponsor's overall liability for total group claims during a plan year.
• C. It is identical to a traditional health insurance policy.
• D. It guarantees profitability for the insurer.

Answer: (B)

Aggregate stop loss protects the plan sponsor by limiting their total exposure for all group claims in a plan year. It pools all claims together and sets an attachment point; once the total claims for the group exceed that threshold, the insurer covers the excess up to the aggregate coverage limit, effectively capping the sponsor’s liability for the year. This is different from per-person stop loss, which protects against high costs for individual members. It’s also not the same as traditional health insurance, since stop-loss is a form of reinsurance that the sponsor purchases to shift risk, not a primary policy. And it does not guarantee insurer profitability; its purpose is risk transfer and cost containment for the sponsor.

Aggregate stop loss protects the plan sponsor by limiting their total exposure for all group claims in a plan year. It pools all claims together and sets an attachment point; once the total claims for the group exceed that threshold, the insurer covers the excess up to the aggregate coverage limit, effectively capping the sponsor’s liability for the year. This is different from per-person stop loss, which protects against high costs for individual members. It’s also not the same as traditional health insurance, since stop-loss is a form of reinsurance that the sponsor purchases to shift risk, not a primary policy. And it does not guarantee insurer profitability; its purpose is risk transfer and cost containment for the sponsor.