What Employers Need to Know About Stop Loss Insurance

As a business owner, one of your primary goals is to reduce your expenses.

However, this is not always possible. In an overly competitive marketplace and a harsh economy, administration and operational costs can easily spiral out of control.

It’s for this reason business owners turn to insurance. With adequate insurance, your business is protected from several risks.

Still, not all businesses take up traditional insurance policies, unless they’re mandatory. If you choose to self-insure, you risk losing a lot of money due to unexpectedly high bills.

This is where stop loss insurance comes in.

In this article, we’re telling you all you need to know about this insurance product. Read on!

Protects You from High Expenses

You already know stop loss insurance shields your company from unforeseen liabilities, but how exactly?

Let’s say you establish a medical fund for your employees’ health benefits, instead of taking up a group health insurance policy. Perhaps from your data, you can tell your business spends about $10,000 on health benefits annually. You assume this will continue to be the annual trend.

Not a bad assumption, but in business, the unexpected can happen. Maybe one or two employees get serious injuries on the job, and their medical bills quickly pile up and hit $20,000 or more.

Since your medical fund holds $10,000, you have to dig deeper into your revenues to settle the rising bills. If you fail or are unable to pay, the employee can sue the business. Needless to say, medical bills or lawsuits can drive a business to bankruptcy.

When you buy stop loss insurance, the insurer will take over your bills after they’ve hit a certain set amount. For instance, if this amount is $10,000 and you’re facing a $20,000 medical bill, the insurer will pay out the additional $10,000.

When you are looking at the cost of Dialysis, it is very clear why you would need coverage to protect your business from exorbitant expense. Dialysis cost averages about $827k in billed charges per year, per patient. And paid claims average around $500k/yr. Specialty Care Management protects you from that risk.

Two Types of Stop Loss Insurance

You can opt for an individual claims policy, or an aggregate claims policy.

An individual claims policy will shield your business when a single claim surpasses the predetermined threshold. On the other hand, an aggregate claims policy kicks in when the value of all claims rolls over the pre-set limit.

Even though you’re free to buy either of these policies, many businesses go for both. You should, too.

Stop Loss Amounts/Premiums Typically Vary

The question you’re probably asking now is “how much does this coverage cost?”

The truth is there is no predetermined amount.

When you go to an insurance company offering this policy, it will need to know more about your business. This involves analyzing your cash flow statement, claims record and number of employees among other things.

Depending on such factors, it will set an amount for you. The amount could be payable in a lump sum, or in installments. You’ll work out the details with your insurer.

Is Stop Loss Insurance Right for You?

Now that you know the basics of this insurance product, you’re certainly wondering whether it’s right for your business.

If you don’t fancy the idea of buying traditional insurance policies, then this product will come in handy.

You never know when an employees’ compensation claims will wipe out your dedicated fund, or when a malpractice lawsuit will compel you to pay more than you had in your budget.

At Specialty Care Management, we will help you make the most of your healthcare revenues. Get in touch and let us help you find the right carrier for your business.