Stop-loss protection in health insurance is designed to

• A. Provide coverage for high-cost claims above a predetermined threshold, protecting the employer or insurer from catastrophic costs.
• B. Cap the total premium charged for all employees.
• C. Cover only routine medical expenses below the threshold.
• D. Replace deductible with a flat copay for all services.

Answer: (A)

Stop-loss protection acts as a financial shield against extremely high medical claims by kicking in once claims exceed a preset threshold. It’s designed to protect the employer or insurer from catastrophic costs, especially in self-funded plans, by reimbursing the portion of claims that go beyond that threshold. This isn’t about capping premiums, and it doesn’t cover routine expenses that stay below the threshold, nor does it replace deductibles with a flat copay for all services. For example, if a single claim is very large and exceeds the specific stop-loss limit, the stop-loss policy pays the excess amount, helping stabilize annual claim costs.