Frequently Asked Questions About Stop-Loss Insurance

As an advisor, you know the importance of stop-loss insurance for small and mid-size employers. Your stop-loss choices risk high-dollar investment from employers, and Benecon offers stop-loss protection through VERIS, a consortium model, as a simpler, safer way to self-fund.

Many consultants working with Benecon use our resources to help employers understand stop-loss to make informed decisions.

Stop-loss insurance is the financial safeguard of a self-funded health plan. When an employer chooses to self-fund, they have more control of their funds, more flexibility, and more data. In exchange, the employer now has some risk. Stop-loss coverage caps that risk, and not all caps are equal. As an advisor, understanding caps is a game-changer and the difference between thousands, even millions of dollars in healthcare spend.

In essence, stop-loss insurance coverage reimburses an employer when medical claims exceed a specified threshold. That threshold can apply to a single individual (specific stop-loss) or to the entire plan (aggregate stop-loss). This safety net allows employers to enjoy the advantages of self-funding without exposing them to major losses. Benecon helps you determine those thresholds and provides targeted stop-loss ratios for each employer on an individual basis. This has an enormous impact when deciding between fully-insured, captives, or other self-insured models.

Stop-loss insurance is a mechanism that is a part of a self-funded health plan, designed into the plan to help reduce risk and protect plan funds.

Here’s how stop-loss insurance functions:

1. The employer funds day-to-day medical and pharmacy claims from its claim account.
2. When a claim surpasses the specific deductible, the stop-loss carrier reimburses the plan for everything above that line.
3. If the total plan claims exceed the aggregate attachment point, aggregate stop-loss protection activates.

Stop-loss insurance acts almost like a pressure valve. In a well-built system, pressure is not feared but rather expected. A self-funded health plan works in the same way. Claims flow through, and when financial pressure rises beyond the design limit, stop-loss insurance acts as a pressure valve, releasing excess strain.

Benecon designs that valve with intention. Through the VERIS consortium, thresholds are calibrated across a collective stop-loss pool, ensuring each employer’s plan can adapt to volatility without disruption. This shows proactive design rather than reactive panic, giving the employer stability over the ever-volatile cost of healthcare.

Limiting Catastrophic Exposure

Catastrophic medical events like organ transplants, cancer therapies, or ICU stays can easily reach six or seven figures. Self-insured stop-loss coverage ensures a single member’s crisis doesn’t become a financial crisis for the employer.

Stabilizing Renewals

For advisors, a renewal strategy is incredibly important. Stop-loss analytics drive renewal negotiations, like reviewing claimants near the specific limit or forecasting trends. In Benecon’s consortium model, pooled purchasing power improves these negotiations and locks in guaranteed renewals with no new lasers. This is a critical differentiator for advisors and employers.

Increasing Data Transparency

Because claims are paid directly by the employer, the plan receives full visibility into usage patterns. Stop-loss carriers often provide additional reporting on large-claim triggers and reimbursement timelines, which advisors can use to fine-tune their benefit design and forecast next year’s exposure.

In a traditional, fully-insured plan, employers pay fixed premiums and transfer all claim risk to a carrier. When employers do this, they lose visibility and flexibility. Self-funding strikes a balance: employers retain plan ownership and oversight while protecting against volatility.

• Control: Employers decide coverage design and cost-containment strategies.
• Protection: Stop-loss absorbs the unpredictable tail risk.
• Transparency: Real-time claim data informs decisions.

As inflation and specialty drug costs surge, this hybrid risk-sharing approach is increasingly appealing to sophisticated employers guided by experienced advisors.

Small and mid-size businesses have options with competitive advantages, including captives and a consortium like VERIS.

A stop-loss captive is an advanced funding mechanism in which multiple employers (or sometimes a single large employer) form a licensed insurance entity to collectively retain a portion of risk. Instead of buying 100% of stop-loss coverage from a traditional carrier, each participating employer shares a portion of claims risk within the captive before external reinsurance attaches.

This structure allows employers to capture underwriting profits in good claim years and gain more stable renewals. For advisors managing portfolios of self-funded employers, captives can offer a competitive advantage by pooling stability. However, a capital investment is required for captives, and renewability is not guaranteed. Captives often limit TPA and PBM choice to their partners, and there are lots of questions around rate caps and how they apply for each employer.

You, as the advisor, are the architect of protection. Your expertise determines whether stop-loss becomes a shield or a source of unnecessary cost. With Benecon, you gain structured support with underwriting expertise, regulatory compliance guidance, and access to pooled stop-loss purchasing through the VERIS consortium.

• Underwriting Precision: Analyze historical claims data to accurately estimate specific and aggregate attachment points.
• Market Negotiations: Solicit quotes from multiple carriers or captives, comparing rate guarantees, contract bases, and other terms.
• Laser Management: Negotiate to avoid lasers on known high-cost members, use other tactics to limit them.
• Renewal Forecasting: Use Benecon’s claims analytics to monitor claims nearing reimbursement thresholds and anticipate carrier behavior before renewal season.

Advisors guiding an employer with stop-loss protection are game-changers. The VERIS consortium provides a funding model delivering stability, transparency, and risk mitigation. To learn more about targeted stop-loss ratios and rate caps allowing small and mid-size employers to safely and simply self-fund, contact us today.