Aggregate Stop-Loss Insurance is an insurance policy purchased by an employer to protect against the possibility of higher-than-expected payouts for employee health plan claims. It is similar to high-deductible insurance, which puts the risk of higher payouts in the hands of the employer instead of an insurance company. The deductible or attachment for aggregate stop-loss insurance is calculated based on estimated monthly claims, the number of enrolled employees, and a stop-loss attachment multiplier, which is usually 125% of anticipated claims.

Organizations that self-insure often face the risk of catastrophic losses due to wide-ranging, high-cost health care expenses, such as a single large catastrophic claim. While traditional health insurance carries this risk, self-insuring employers bear the full brunt of these costs. With an aggregate stop-loss policy in place, employers can limit the potential financial losses associated with such expenses.

Aggregate Stop-Loss Insurance typically covers claims in excess of the stop loss attachment. That is, the insurance will cover any claims beyond a preset limit – the stop loss attachment. This limit can be set by the employer, taking into account the expected claims in any given month or year. The stop-loss attachment is usually calculated using the estimated value of claims, the number of enrolled employees, and a multiplier, typically around 125% of estimated claims.

For example, if an employer estimates total claims to be $1,000 per month and the stop-loss attachment is set at $1,250, the insurance would then cover any claims above the $1,250 threshold. This ‘stop-loss’ point limits the employer’s financial exposure, helping protect them from catastrophic losses.

Overall, aggregate stop-loss insurance is an invaluable tool for employers who self-fund their health plans. By providing protection against catastrophic losses due to wide-ranging, high-cost health care expenses, it can help employers manage their risk and maintain financial stability.