What is stop-loss coverage in a group health plan?

• A. A provision that caps an individual's annual out-of-pocket expenses.
• B. A feature that covers cosmetic surgery.
• C. A plan that pays the provider directly.
• D. A clause that excludes preexisting conditions.

Answer: (A)

Stop-loss coverage is protection that caps an individual’s annual out-of-pocket costs in a group health plan. It sets a maximum on how much a member must pay for deductible and coinsurance in a policy year, shielding the person from catastrophic medical expenses. In self-funded plans, stop-loss insurance can reimburse the employer for claims that exceed set thresholds, and there are two forms: per-member (individual) stop-loss and aggregate stop-loss for the group. This concept explains why the option describing a cap on an individual’s out-of-pocket expenses is the best fit. The other choices relate to services or plan features that aren’t what stop-loss covers.