Stop-Loss Insurance Law and Legal Definition

Stop-Loss Insurance is an insurance that protects a self-insured employer from catastrophic losses or unusually large health costs of covered employees. This coverage is available in two types:

Specific stop-loss coverage is initiated when a claim reaches the threshold selected by the employer. After the threshold is reached, the stop-loss policy would pay claims up to the lifetime limit per employee for the self insurance medical plan.

Aggregate stop-loss coverage is initiated when the employer's self insurance total group health claims reach a stipulated threshold selected by the employer. Typically, this threshold is 125% of the self insurer's annual estimated group health claims cost.