5 of the Most Crucial Medical Stop Loss Terms

self funded insurance

As an employer with a self-funded insurance policy, you know that insurance terminology can be rather confusing and difficult to understand – especially if you are running a startup or find yourself in the market for the first time. We strive to help our clients have the best possible understanding of their policies they hold with us and the terminology of the medical stop-loss insurance industry in general. We’ve compiled a list of five terms and acronyms that are crucial for you to understand to get the most out of your medical insurance.

1) Self-Funded 

As an employer, you decide on this kind of funding to cover the costs of employee premiums and health claims from company assets. Self-funded insurance enables you the employer to pay out funds that cover actual claims, rather than having to pay for the fixed price premiums of traditional, fully insured policies. This kind of insurance is becoming more and more common in the workplace.

2) Variable Cost

Employers with self-funded health insurance plans, variable costs, also known as soft dollars, sometimes end up in another way for you to save money on company healthcare. Your company adds funds to a reserve business account based on the estimated annual amount of all potential claims made by employees. If funds remain after a plan year, they are factored into future budgets dedicated to company medical expenses.

3) Fixed Cost

Fixed costs are simply fees that are factored into a self-funded healthcare budget, regardless of what the actual expenses may end up being. If you get a fully insured plan, you will be paying 100% of premium rates to the carrier. In comparison, costs for self-funded plans are around 25% of the overall cost of the plan, which covers for administrative fees and medical stop-loss insurance.

4) ERISA

ERISA stands for Employee Retirement Income Security Act of 1974. Congress passed this law that established federal regulations on self-funded employee benefit plans. As a self-funded employer, you will be able to avoid federal fees associated with this act and prevent your company from having to pay state taxes on premiums, depending on the location of your business.  

5) SPD

SPD stands for Summary Plan Description. This is a comprehensive list of the terms and conditions of healthcare plans terms and conditions, either intended for an individual employer or an entire organization. Your company’s SPD will also define the exclusions and benefit coverage on your self-funded healthcare plan.

Protect Your Business with a Medical Stop Loss Insurance Plan

Just as you want your employee’s health to be covered and protected, you also wanted to protect your business from having to pay out abnormally high claims. Stop-loss underwriters can also help you utilize forecast technologies to predict future spending and healthcare budgets for your business.

At Prodigy, we are independent underwriters who take pride in making sure our clients understand their policies and avoid hidden fees often associated with many direct providers. We also outsource our claims department to add another layer of protection for your business with a stop loss insurance plan. If you have any questions about how medical stop-loss insurance can protect your business, or to set up a policy, contact us today.

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