Medical stop-loss insurance's popularity is on the rise as more employers look to an array of tools to protect themselves from unexpected health insurance costs.

A white paper produced by insurer QBE Solutions notes that the percentage of self-insured employers that have stop-loss coverage has risen from less than 50 percent in 2000 to 60 percent today. Medical stop-loss coverage protects self-insured plans from unexpectedly high claims.

The paper concludes that several key factors are driving the increase:

  • Ongoing cost increases in health insurance;

  • Major insurance claims are higher than they once were;

  • The complexities of compliance with the Patient Protection and Affordable Care Act (PPACA) has raised concerns among self-insured plan sponsors about unexpected costs.

Small employers are moving to stop-loss and doing so in groups that offer them many of the same advantages that enterprise employers derive from stop-loss coverage, the paper says.

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"For smaller employers, participation in a group captive can provide increased access to many of the same advantages (increased risk spread, service provider cost leveraging, surplus dividend sharing, and so forth) that are enjoyed by larger organizations with a single-parent captive," the paper states.

What scale of savings can employers expect to realize by purchasing stop-loss insurance? That's hard to predict, the paper says, since the true purpose of stop-loss is to avoid a catastrophic claim that could sink the company.

Rather, the insured achieves some peace of mind and can expect "long-term stability and sufficiently reduce the ultimate cost of risk over time."

There are various types of stop-loss coverage available, with an appropriate choice dependent upon company size, company industry, level of risk comfort, and other factors. One thing is certain, the paper says: The upward trend will continue into the foreseeable future.

"Interest in self-funding and stop loss captives will continue to grow as medical costs continue to rise, and uncertainties related to the ACA threatens the amount of control employers can maintain within more conventional insurance structures. Properly structured captives can stabilize, and even lower the cost of medical stop loss coverage, and they can facilitate enhanced benefit delivery, over more traditional self-insurance, for many employers," the paper concludes.

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Dan Cook

Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.