Strictly speaking, stop loss reinsurance is used by most self-insured employers to reduce exposure to loss with their health benefits. The employer establishes a qualified plan document that becomes their group benefit plan. To this they attach a summary plan description that details the employee’s coverage, coinsurance, deductibles and co-pays.

The employer then hires a competent plan administrator to manage the administration of the plan benefits. The administrator also might provide a medical network that offers a discount on medical costs when incurred and they usually arrange a benefit prescription manager to mitigate cost of prescriptions.

Stop loss is often provided by the TPA to limit the employer’s exposure to loss or claim retention. There are two varieties of stop loss. One is the specific excess of loss and the other is an aggregate stop loss.

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