What is Aggregate Stop-Loss Insurance?

Aggregate stop-loss insurance is a policy that limits total claim coverage to a specific amount. Once claims exceed this amount, the stop-loss insurer covers all additional claims. Based on how it is used, aggregate stop-loss insurance is essentially insurance with a very high deductible. This approach is used to keep either a large number of smaller claims or a few large ones from depleting a self-funded insurance plan. It is intended to provide coverage to an employer, not the employees who work for it.

This policy is usually applied to a self-funded health insurance plan, where the employer pays all employee health care claims up to a certain amount, after which the stop-loss insurance takes over. The threshold beyond which claims are covered by the insurer is a multiple of the anticipated amount of claims, such as 1.25x of the anticipated claims. Increasing this multiple reduces the cost of the insurance, since it would take a highly unusual spike in claims to surpass the threshold. Conversely, the insurance cost increases as the threshold is lowered, since this increases the probability that the company’s total claims experience will exceed the threshold.