What Is a Stop-Loss Claim and How Do You File One?

Understanding Stop-Loss Insurance

Stop-loss insurance protects self-funded employers from unexpectedly high healthcare claims. Unlike traditional fully insured plans where an insurer assumes all risk, self-funded employers pay for their employees’ healthcare costs directly. Stop-loss coverage mitigates the financial exposure of this self-funding model, ensuring the employer’s financial stability.

This insurance is distinct from typical health insurance policies purchased by individuals. It functions as a reimbursement policy: the employer initially pays claims and then seeks reimbursement from the stop-loss carrier for costs exceeding predetermined thresholds. Employers often work with third-party administrators (TPAs) to manage their self-funded plans and facilitate the claims process.

Stop-loss insurance comes in two main forms: specific and aggregate. Specific stop-loss protects against large individual claims, reimbursing the employer when a single plan participant’s medical expenses surpass a set amount, known as the specific deductible or attachment point. This coverage protects against the financial impact of severe illnesses, accidents, or complex medical procedures affecting one person.

Aggregate stop-loss provides protection against the cumulative total of all claims incurred by the entire group over a policy period. If total paid claims for all plan participants exceed a predefined aggregate deductible or attachment point, the stop-loss carrier reimburses the employer for the excess. This safeguards the employer from an unexpectedly high overall claims experience, even if no single claim reaches the specific stop-loss threshold.

Key Policy Thresholds

Stop-loss policies define financial thresholds that dictate when coverage activates and how much reimbursement an employer can receive. The attachment point, also known as the deductible, is the trigger for stop-loss coverage. For specific stop-loss, this is the dollar amount a single individual’s claims must exceed before the insurer reimburses the employer. For example, if a specific attachment point is $100,000, claims for one individual must surpass this amount for reimbursement.

An aggregate attachment point is the total dollar amount of claims for the entire group that must be paid before aggregate stop-loss coverage applies. Once the sum of all paid claims for the policy year exceeds this limit, the stop-loss carrier reimburses the employer for the additional costs. Both specific and aggregate attachment points are negotiated during policy underwriting.

Some policies may include a corridor deductible, an additional layer of employer responsibility between the initial attachment point and full stop-loss coverage. If present, the employer remains responsible for an additional percentage or fixed amount of claims after the primary attachment point is met, before the stop-loss carrier covers the remaining costs.

Policies also specify a maximum liability, the highest amount the stop-loss insurer will pay out under the policy for a given period. This limit applies to both specific and aggregate claims. These thresholds directly determine when a claim can be made and the extent of financial protection provided.

Preparing Information for a Stop-Loss Claim

Before submitting a stop-loss claim, employers or their third-party administrators (TPAs) must gather and organize data and documentation. Detailed claim data is required, including plan member names, dates of service, medical services rendered, and billed amounts. This data shows that claims have met the policy’s thresholds.

For high-cost claims, especially those triggering specific stop-loss, additional clinical information or medical records may be necessary. This documentation helps the stop-loss carrier verify the medical necessity and appropriateness of services. Employers should be prepared to provide such records upon request for complex or unusually expensive treatments.

Employers must also compile Explanation of Benefits (EOBs) statements and proof of payment for all claims. EOBs detail how each claim was processed, including charges, allowed amounts, and the portion paid by the plan. Proof of payment, such as bank statements or cleared checks, confirms the employer has already disbursed funds.

The stop-loss policy documentation must be accessible. This policy outlines all terms, conditions, exclusions, attachment points, and maximum liability limits. TPAs often play a central role in this preparatory phase, collecting and organizing the data for submission.

Submitting a Stop-Loss Claim

Once information and documentation are prepared, the next step is submitting the stop-loss claim. The submission method depends on the stop-loss carrier and TPA involvement. Many TPAs use electronic portals or secure file transfer protocols to submit claims directly to the carrier.

Stop-loss carriers require specific claim forms to accompany documentation. These forms standardize the submission process. Employers or their TPAs must accurately complete these forms, attaching supporting documents like claim data summaries, EOBs, and proof of payment.

Submission methods include electronic transmission via a secure online portal, secure file transfer protocol (SFTP), or physical mail. Electronic submissions are preferred due to efficiency, speed, and security.

After submission, the stop-loss carrier reviews the claim. This involves verifying documentation against policy terms, confirming attachment points are met and claims are eligible. The carrier may request additional information. Once approved, reimbursement is issued to the employer, often within 30 to 60 days.