A type of specialized self-insurance allows employers to pay employees’ healthcare costs up to a certain predetermined amount and then rely on the insurer to make up the difference. Though some employers see this as a tactic for saving money, others end up spending much more than they would have used a group health insurance plan instead.
Depending on the policy’s limits and overall employee health, stop-loss coverage may be risky and very expensive. It can protect the finances of companies containing younger workers with fewer medical bills. Still, it can be a major expense if even one worker faces a major health issue, for which the employer must then compensate.
To see if stop-loss insurance is right for your company, estimate the claims you’re likely to pay and compare them against a stop-loss coverage premium. In the end, you may find yourself well ahead by purchasing an employee group health insurance plan.