Should Your Clients Consider Stop-Loss Insurance?
A Guide for Brokers and TPAs
Self-funding continues to grow, with research showing that as of 2024, 63% of covered workers are now enrolled in self-funded plans.1 As more employer groups turn to self-funding their employee health plans, brokers and third-party administrators (TPAs) are now tasked with navigating the risks—which means exploring stop-loss insurance. Like anything in the insurance space, there are situations where stop-loss is an advantage, and situations where it might not be for you. We’ve got your guide for exploring when stop-loss insurance makes sense for brokers and TPAs, and how it can protect clients from catastrophic financial exposure.
Stop-Loss 101
While self-funding offers undeniable advantages, such as flexibility and potential cost savings, it also comes with the risk of unpredictable, high-dollar claims. That’s where stop-loss coverage comes in: as a strategic safeguard. It reimburses an employer for claims that exceed a set threshold, protecting them from catastrophic costs. There are two primary types of stop-loss coverage:
Specific Stop-Loss: Protects against high-cost claims from individual plan members.
Aggregate Stop-Loss: Protects against unexpectedly high total claims for the entire group over a policy period.
Together, these layers of protection allow employers to confidently manage self-funded plans without absorbing unlimited financial risk.
When to Recommend Stop-Loss
Stop-loss insurance provides predictability when the risks of self-funding grow higher than you’d like. It transforms potentially crippling volatility into manageable, planned expenses, which is vital with the rise of high cost claims we’re now seeing.
For brokers and TPAs, recommending the right stop-loss arrangement can significantly strengthen your advisory role and deepen client trust. But not every self-funded employer can benefit from the same level of stop-loss insurance. Here’s our quick guide for identifying who best fits the stop-loss criteria:
Group Size
- Under 250 employees: Stop-loss is often essential. These groups are especially vulnerable to volatility from even one high-dollar claim.
- 250–500 employees: Still at risk from large claims but may negotiate higher deductibles to reduce premiums.
- 500+ employees: Even large groups can be exposed to financial burdens from catastrophic claims, although they can withstand more risk and therefore purchase higher deductible options.
Claims History
Looking into the group’s historical claims data is a vital step. Repeated high-cost claims or chronic conditions can give you a clue on what level of stop-loss the company will need. On the other hand, a stable claims history might support a higher deductible or selective coverage design, reducing premiums without sacrificing protection.
Risk Tolerance and Financial Resilience
Employers with stronger financial flexibility may choose higher deductibles or limited coverage. More cautious clients, or those with tighter budgets, will likely benefit from lower specific deductibles and comprehensive aggregate stop-loss to ensure budget stability.
The Tailored Advantage
Ultimately, it’s important to remember that stop-loss isn’t just a safety net. It’s a strategic tool that can give you the advantage when guiding clients through self-funded insurance. As a leading managing general underwriter with over four decades of stop-loss experience, we’d leave you with our top recommendation: remember that each client is unique. When you do consider stop-loss, it shouldn’t be one-size-fits-all; it should be strategically customized to fit that client’s unique needs and goals.