With the increasing frequency of high-cost drugs and procedures, the thought of going self-funded can be daunting. On the one hand, you get more control over your claims, only paying what is incurred. On the other hand, you can have higher month-to-month volatility depending on the types of claims. This is where an individual stop-loss policy can provide more financial stability and protection from catastrophic, high-cost claims.

To recap, an individual stop-loss policy is a reinsurance policy available to self-insured groups that provides financial protection against catastrophic claims.

Now that your refresher is complete, let’s learn about specific deductibles!

Your specific stop-loss policy places an individual specific deductible for every covered Member. When a Member accumulates claims over the individual specific deductible, the stop-loss carrier pays all claims over the individual specific deductible for the remainder of the policy period. Individual specific deductible levels vary significantly across groups, ranging from $30,000 to $1,000,000.

For example, let’s say ABC Company has elected a $50,000 specific deductible. In this scenario, the group is responsible for all claims for each covered plan member up to $50,000. In the event that one of them has over $50,000 in accumulated claims, the stop-loss carrier then takes on the financial liability and will pay all subsequent claims in the policy period.

Here’s how that might work:

Member 1 has one claim for a total of $100,000.

Member 2 has three claims for a total of $47,000.

Member 3 has seven claims for a total of $90,000.

This deductible is set in advance and is an important term of your stop-loss contract. It is an essential component of any self-funded plan because it protects the employer from costly claims stemming from any one individual. Groups can elect the deductible level that works for them, and we can help.

Your business needs individualized attention in order to set the specific deductible that is right for you. We recommend that if you have specific questions about what deductible will serve your needs and those of your employees, you speak to your benefits consultant, who has the on-the-ground expertise necessary to make sure that you are taking all factors into account.

In addition, we recommend speaking to a licensed tax professional in advance of making any decisions that may affect your plan. Since local and state regulations may affect this, we rely on our nationwide network of vetted benefits consultants, who have guided thousands of employers to a better way for their benefits.

What is a level-funded insurance plan? The simple answer is that it’s another type of health plan.

Another one? Yes, and if you’re overwhelmed by the options, you’re right to feel that way. But the more you know, the more informed your employee healthcare-related decisions can be. So, let’s break it down.

Essentially, level-funded health plans combine elements of fully insured health plans and self-insured health plans to give employers a middle ground¹.

As you may remember, companies get comprehensive coverage with fully insured plans², but it comes at a high cost that increases annually. Plus, there’s a long list of other downsides that many employers are starting to realize aren’t worth the cost.

On the other end of the spectrum, self-insured³ plans allow companies to pay the cost of the claims as they come in. Companies can spend according to their specific needs, which results in financial savings. The downside? Self-insurance comes with the risk of volatile, potentially high claims costs that an employer may be unable to afford.

As a seemingly happy medium (at least on the surface), level-funded plans combine elements of both fully insured and self-insured plans, the good and the bad. The idea here is that companies can get the coverage of a fully insured plan while having certain flexibilities and lower costs of self-insured plans.

So how does a level-funded plan work?

For the most part, level-funded plans work similarly to a fully insured plan. Companies pay a fixed monthly payment (the premium) each month to the insurance carrier. That money will be used to cover costs that include:

So, what’s the appeal of a level-funded plan?

The most popular reasons include:

  1. They come with a fixed, predictable monthly cost
  2. The plans can be flexible and be chosen to fit the company’s needs
  3. Insurers may provide claims data for insights on health spend
  4. Possibility of refunds

Companies may get refunds if their total claims, costs, and expenses are less than the maximum claims paid for the plan’s duration at pre-funding, typically at the year’s end and right before contract renewal.

Sounds great, right? But hold on.

Here’s what they don’t tell you about level-funded plans—

All the benefits mentioned heavily depend on the insurer. And for each of those benefits, some downsides emerge too.

The most apparent downside?

Level-funded plans work a lot like fully insured plans. Yes, it’s a fixed cost, and predictability is great for planning, but if you’re predictably paying for a feature that doesn’t fully benefit you, it’s time to rethink things.

Like a fully insured plan, the “fixed” costs rise with time. If you had a “bad year” due to high claims costs, your premium might skyrocket the next time you renew your contract!

And then we have the “refunds.” They’re great, but only if you manage to get one.

Refunds aren’t certain, and the refund percentage isn’t significant even in a “good year.” On average, most carriers give less than a 50% refund, retaining the majority of your unused funds.

You can think of it as a “heads you lose, tails you tie” situation. While you take the full losses in a bad year, you have to split the winnings with the carrier in a good year, too. In other words, the house always wins because the model is tilted in the carrier’s favor.

Also, depending on the insurer, refund policies come with many conditions and can be very hard to actually collect. Often, the “refund” comes in as credit to use towards next year’s expenses, forcing companies to renew another year to even receive it. Plus, it’s not usually a physical check you can reinvest into your business. You don’t technically see the money come back to you again.

On the off chance that you want to switch carriers at your renewal? No matter how “good” your year was, forget your refund altogether.

So, just as you pay for a fully insured plan to cover claims costs—costs that you may or may not end up incurring—you also pay for the possibility of a refund in a level-funded plan. Basically, if you don’t generate claims, you are wasting money, and if you do, expect your premiums to rise. Especially in a bad year—your premiums could shoot up significantly.

At the end of the day, whether you get the value you pay for is down to factors you can’t control.

It’s worth noting that a level-funded plan may be a good foray into self-insurance for employers who are too small or not the right fit for a pure self-insured plan, but drawbacks exist.

However, we have options for you.

When you become a part of ParetoHealth, you get the freedom and flexibility of a self-insured plan and the security of a fully insured plan – without the downsides.

We get it: Navigating the American healthcare system is tough.

If you’ve landed here, you’re probably struggling with your employee benefits. You’ve likely heard of an insurance captive (at least in passing) and wonder if it’s a good funding option for your company.

A growing number of midsized employers like you are taking this approach to combat the rising cost of healthcare. So, let’s dig a little deeper into what this really means.

Defining the captive

A captive is an insurer owned by the people or entities using its services. Think about it like a credit union. When opening a policy, you become a stakeholder there, with the amount of your stake equaling the amount of money in your account.

In other types of plans (most notably, fully-insured), it’s a different story. Here, it’s like having an account at a bank. You’re simply using a service they provide.

A group captive is an insurance captive that serves more than one person or entity. There are as many types of group captives as there are types of insurance: property & casualty, homeowner’s insurance, and so on.

Employee benefits captives

Employers across the United States are increasingly interested in employee benefits group captives. This is due to the changing healthcare marketplace and to a philosophical shift in their mindset. Because of the opaque and expensive traditional offerings, they want to take control of their healthcare spend without compromising on quality.

The cost of employee health insurance is high and often rises unpredictably. Many midsized businesses are being squeezed dry, and they usually do not know how much their employee benefits costs will increase next year. Since this item is usually the second or third largest (behind payroll) in the operations budget, employers are seeking ways to decrease the cost and volatility of their health benefits.

The incidence of high-cost claims has risen dramatically in the past decade, and the trend is only set to continue. New gene therapies (for instance), while promising for the treatment of severe medical conditions, often come with multi-million-dollar costs. One such case, while rare, could lead to catastrophic increases in healthcare spending.

That’s why many employers have come together to combat these rising costs. By creating or joining captives to buy coverage for their employees, gaining superior terms on reinsurance, and spreading volatility out over the entire population, these employers are getting better plan terms and better benefits.

How does this happen?

First, we need to consider the size and scale of a group captive.

Let’s say you’re buying a stop-loss policy worth $400,000 for a business with 150 employees. You’d have to deal with a few of the following realities:

What does this mean?

If one of your 150 employees had a multi-year or catastrophic health claim that cost your plan millions of dollars, you might face a laser or a massive renewal increase for the policy. This is because, for your carrier, the policy represents $400,000 in their book of business, but it may have cost them several million in claims. No entity can last long if the economics add up like that.

However, when you’re in a group captive with thousands of other employers representing hundreds of thousands of employees, a catastrophic claim from one employee is a ripple in the ocean. By spreading these costs across the owners and users of the captive, you reduce volatility as you work to support each other.

In addition, larger populations tend to follow a statistically normal distribution of unusual events more than smaller ones do.

Think about it like this: You have a group of five people, and you want to find their average height. One particularly tall or short person can easily skew the result and make it seem like that group, on average, is very tall or very short. If you include the same very tall or very short person in a group of several hundred, their impact on the average is significantly reduced. Expand the group to many thousands, and they may have no individual effect.

At ParetoHealth, we refer to this as “the ocean effect.” If you take a 55-gallon drum of salt and drop it into a bathtub, the salinity of the water will change drastically. Drop it into the ocean, and the effect will be unmeasurable. The salt represents high claims, and the water represents the population you are dealing with. Get a large enough body of water, and you can absorb the volatility.

The ParetoHealth difference

ParetoHealth’s mission is to reduce the impact of volatility on individual employers, make self-insurance possible for small and midsize businesses, and help reduce the overall cost of healthcare.

Our employee benefits captive program makes that happen. We provide a 30% rate cap on your stop loss policy and no new lasers, ever, as long as you’re part of our program – making our stop loss policies unique.

Your stop loss premium is a much smaller proportion of your total plan costs than a fully-insured premium: a 30% increase in this premium is usually equivalent to about 7-8% fully-insured.

There is a certain amount of risk-sharing here. Still, your captive manager is responsible for accepting prospective members who are financially healthy and represent a match for our overall risk pool. We believe in helping employers combat volatility and rising costs, and the employers in our program reflect that.

A fully-insured program includes the same or higher risk-sharing with other customers of that carrier, but there’s a big difference: Fully-insured carriers can easily hand out premium increases, and their processes can be opaque and dependent on many different factors.

Simply put, you can think of it this way: traditional insurance carriers often drive value to shareholders through higher premiums that increase profit margins. Our approach drives value to employers by reducing healthcare spending and the volatility that employers have to face.

If you’re interested in fighting the rising tide of healthcare costs, reducing volatility, and gaining true ownership over your employee benefits, ParetoHealth is here to get you started.

A fully-insured health plan is one of the common, traditional types of employer-sponsored healthcare. Employers pay monthly premiums that are recalculated on an annual basis. This calculation is based on the number of plan members, their previous claims history, and the policy structure.

It is also highly inefficient and, in almost all cases, a bad choice for smaller employers.

The phrase “fully insured plan” should go down in history as one of the most effective pieces of marketing writing to ever exist. It’s designed to make the term seem nice and comprehensive, but it hides far more than it reveals.
It’s not “full” – at least, it’s not full of anything good – and it’s not as much insurance as it is a deferral of payment.

But before we get too far into it, let’s talk about its basic structure.

Honestly, the politest way of describing this fully insured model is “insurance as a service.” In exchange for a certain amount of money within a 12-month period, your plan costs will not go above that amount. The carrier takes on the risk, and you provide an agreed-upon amount of money that makes this arrangement make sense to them.

To understand what we mean, take a look at it from the carrier’s perspective.

They have a number of policies on their books, and they have to make sure that these policies are profitable. While they make payments for the claims that your employees submit to them, they are reassessing the risk that your policy represents.

If you have a good year (meaning that your claims are less than the amount of premium you pay), then the carrier often provides you a flat increase (meaning you pay the same next year as you did the previous year) or a small increase, reflecting the normal process of inflation.

This means that, in a good year, the plan sponsor ends up overpaying for their coverage by definition. It is vanishingly rare for the following year to include any substantial reduction in costs.

Of course, you could also have a bad year in which your claims are higher than the premium you pay. This is, of course, the point of having insurance: it is for unforeseeable and expensive contingencies.

The year after a bad one, though, the plan sponsor on a fully-insured plan is very likely to have to pay a significant increase in their premium. The logic behind this, from the carrier’s point of view, is sound in a certain sense. They were taking on a risk that turned out to be higher than they had initially calculated, and they have the right to increase that premium in light of the newfound risk.

This means, effectively, that you are not so much insuring your risks as you are deferring payments for them into next year. After a good year, you pay a small increase. After a bad year, you pay a big one.

In addition, any increase you receive becomes part of your new status quo. Generally, we have found that most employers face around one bad year in every five. You should be able to take as much advantage of those good years as you can while also having the protection that you need during a bad year that could otherwise prove an unsustainable expense. Having to pay for one year’s bad claims in perpetuity is not the way of solving this problem.

This has led to a phrase that we use at ParetoHealth to describe fully-insured plans: deferred, not insured. Companies in this type of funding arrangement are essentially self-funded but with some key differences: paying for last year’s claims instead of this year’s, zero visibility into what is driving these costs, and much less flexibility in plan design.

We’ve already gone over the first of these. The second is also crucial: almost no fully-insured plans will provide data on the types of claims driving your costs. This impact can be significant since you cannot control what you cannot measure.

How do you know, for instance, whether your high costs for your previous plan year were driven by surgical or pharmacy claims? If you knew, then you could put measures into place that would not only reduce your costs but also improve the quality of care that your employees received. Under a fully-insured plan, this is next to impossible. The only cost-saving measures available under the vast majority of fully-insured plans are those that reduce the quality of your benefits offering. If your goals include attracting and retaining talent, then this is quite clearly not the best option.

Third, we come to the issue of plan design. Fully-insured plans are much more heavily regulated than other types of benefits programs. This, taken with the lack of transparency into the claims that are driving your costs, means that it is nearly impossible to tailor your benefits around what your employees actually need. This lack of flexibility and the impossibility of an individualized approach is another mark against this type of plan.

The carrier also has to price policies based on how their book of business is performing. This term refers to all of the policies that they have written.

Simply put, pricing for your policy isn’t just about you—it’s also about all the other groups the carrier is covering. You share the same risk pool with every other group your carrier covers, like it or not.

Beyond that, the reassessment process is often opaque, but the one thing you can almost always depend on is your rates going up.

The core of this business model is about the balance of risk and reward, where only you take on the risk while the carrier pockets the reward. So, if you have $0 in claims, your premium goes into their profit margin, but your premiums still rise after any bad year that strikes. You just can’t win. Said differently, “The house always wins.”

Does that seem fair to you?

It always seemed unfair to us.

If you need a refresher on any of the basics of stop-loss insurance, please see our other articles on the topic:

Stop-Loss Insurance

Specific Stop-Loss

Renewing an individual stop-loss policy is a balance of reviewing a group’s historical experience, understanding the performance of a book of business, and assessing potential large future claims. All three of these pieces are considered when considering how many claims to expect in the upcoming policy period and, consequently, how much premium is required for the policy.

While reviewing this material for a group’s renewal, a carrier might discover what is often called a “catastrophic claimant.” These are individuals who are projected to have claim totals well above the individual specific deductible level. This is where a laser might come into play.

A laser is a separate, high, individual specific deductible that applies to a single, identified person within an individual stop-loss policy. For example, an employer is under a $50K individual stop loss (ISL) level, and one person is lasered at $500K. The group is responsible for up to $50K for every employee except the lasered individual. For this individual, the employer is now responsible for up to $500K because they are lasered out of the policy’s $50K ISL level.

As another example, let’s say we have a 150-employee group with a $50K ISL level, $400K in annual premium, and an emerging catastrophic claimant projected to have $500K in claims. With the projected claim total well over the annual premium, the carrier will need to account for this catastrophic claimant in the renewal pricing and will likely do this in the form of a laser.

Suppose they put a $400K laser on this individual. In that case, the carrier can shield themselves from the total cost of the claimant, pass $400K of liability onto the employer, and give the ISL premium a more typical increase. This can be a pretty intimidating concept for a 150-employee group, having to potentially fund all of their regular health care costs plus an additional $450K for one individual.

At ParetoHealth, we include a no new laser and 30% rate cap clause in all our contracts, so groups never have to worry about getting stuck with that kind of financial liability after they join. This uniquely strong contract allows employers to take a long-term view of their benefits strategy.

Consider when evaluating the rate cap that your premium on a self-funded plan ordinarily only represents around 25% of your total costs, meaning that a 30% increase only equates to roughly 7-8% on overall plan costs.

We can do this because of the strength of our captive: our significant size and scale can help mitigate this risk across the captive block without the need to add new lasers when catastrophic claimants emerge.

Risk-sharing is the cornerstone of our captive program and allows us to offer our unique, multi-year version of stop-loss coverage. We take our stewardship of the captive very seriously, vetting potential new employers for financial stability and conceptual buy-in at several stages before selling a policy. Almost all common forms of insurance require a similar risk-sharing, and our pool consistently performs well.

Have you paid for a health plan that provides prescription drug coverage? If so, you’ve likely been impacted by the work of a pharmacy benefits manager (PBM).

Prescription drug costs have skyrocketed over the years – and some argue that PBMs are a contributing factor.

But what is a PBM? What do they do, and why do we need them?

Great questions. Let’s explore them together.

What is a pharmacy benefits manager (PBM)?

A PBM is an entity that works as an intermediary between two parties: those who need pharmacy benefits (i.e., you and your insurer/health plan provider) and those who supply prescription drug benefits (i.e., pharmacies and drug manufacturers).

PBMs were first formed in the 1960s to help insurers – and the individuals and companies they insured – reduce spending, offer clinical insight, and provide quality pharmacy benefits.

Essentially, PBMs are middlemen with two main roles:

…at least, that’s how they’re supposed to work.

The changing face of PBMs today

Over the years, we’ve faced a steady increase in the cost of prescription drugs, pharmacy benefits, and health plans.
PBMs today are still supposed to serve those two leading some, but this is complicated by a few of the ways they get paid.²

Tactic #1: Rebates

One revenue source for PBMs is rebates.

Rebates are discounts provided by the drug manufacturer to the PBM that help offset the cost of the medication in exchange for a place on the PBM’s formulary.
As we mentioned earlier, a formulary is a list of preferred drugs that your insurance will cover, and manufacturers are driven to get their drugs on these lists for a key reason: increasing their market share.³
PBMs, in an ideal world, should pass these rebates to patients or plan sponsors directly – but this isn’t always the case. No regulations require PBMs to pass on these rebates or make their rebate amounts public, so it’s difficult to know how much of that money is going back into PBMs’ pockets.³

Tactic #2: Spread pricing

Another tactic employed by many PBMs is spread pricing.

Spread pricing refers to the discrepancies between how much a drug costs at a pharmacy, how much a PBM reimburses the pharmacy, and how much a PBM charges an insurer.

Let’s say a drug costs a pharmacy $6 to buy and dispense. The PBM pays the pharmacy $8, giving them a $2 profit. Then, the PBM bills the insurer $16 for the drug. The PBM made an $8 profit on a drug that only costs $6.⁴ The insurer gets the short end of the stick (and so does the pharmacy), while the PBM comes out on top.

Of course, you don’t see this in your bill – especially if you’re fully-insured. With a traditional fully-insured plan, you’re kept in the dark about how PBMs use the money you’ve paid to provide the pharmacy benefits your employees need.

Tactic #3: Improperly carved-in pharmacy benefits

Improperly carved-in pharmacy benefits are to blame.

In other words, pharmacy and health benefits are both contracted through a single health insurer in fully-insured plans. An employer has a plan with their insurance company, which has a contract with a PBM. The employer has no direct relationship with the PBM.

This arrangement is usually convenient: One vendor provides all your health benefits, making administration easy. Still, there’s sometimes a major lack of transparency regarding pharmacy benefits, and you could be spending unnecessarily on coverage for your employees.

Talk about irony.

If you’re under a fully insured plan, ask yourself, “Is my pharmacy benefits program helping – or hindering – me and my employees?”

The self-insured solution

It doesn’t have to be like this.

Unlike fully-insured plans, self-insured plans allow you to opt for a carved-out pharmacy benefit.5 In a carved-out model, either for specialty drugs or for all pharmacy benefits, employers contract directly with their chosen PBM.

Get more out of your pharmacy benefits

There are definite downsides to some PBMs, but the good news is this: Not all PBMs are created the same.

When given the choice and access to claims data, you can find a PBM that aligns with your goals and interests. You can negotiate your contract to ensure claims transparency, auditing ability, and more. You also have the ability to customize your own formulary to drive behaviors (and cost) to your benefit.

With increased oversight, PBMs can be valuable partners for containing costs rather than a cause of rising ones.

We have a two-part mission at ParetoHealth: to make self-insurance possible for more employers and to help employers reduce the cost of healthcare. Cost containment is critical to our success in these two areas and has been one of our core differentiators since we began in 2011. In our early days, we instituted basic programs like health risk assessments, biometric screenings, and tobacco cessation to foster accountability and engagement across our growing membership. With each year of steady growth, we have welcomed new ideas, strategies, and solutions to address the increasingly complex healthcare ecosystem. The progression and evolution of our cost containment strategy and approach led to the 2020 launch of our exclusive Integrated Cost Management Platform (ICM), a pre-packaged suite of Fortune-100-level solutions and initiatives designed to effectively reduce the cost of healthcare while enhancing captive members’ benefit plans.

ICM has three main components: Integrations, Interventions, and Playbooks. Driven by actionable data and insights, these turnkey offerings help employers save money and connect their employees with high-quality, cost-effective care


ParetoHealth Integrations optimize the activation and engagement of point solutions with improved TPA and PBM connectivity. Focused on addressing targeted areas of risk like oncology, high-risk maternity, and surgeries, our integrated point solution partners help guide and advocate for employees as they navigate treatment, ensure the appropriateness of diagnoses and care plans, and preserve payment integrity and access to high-value care.


To help our captive members and consultants identify real-time savings opportunities, ParetoHealth analyzes claim data monthly for certain trigger diagnoses or events and provides the recommended course of action through our ParetoHealth Interventions. These trigger events give visibility to certain high-cost, low-frequency claims like End Stage Renal Disease (ESRD), where coordination of benefits activity can lead to significant reductions in cost for you.


In addition to Integrations and Interventions, Captive members enrolled in ICM have access to our ParetoHealth Playbooks, which offer a retrospective analysis of “missed opportunities” based on member-specific data points. Each Playbook includes a series of addressable “plays,” with supporting context to justify them as areas of focus. Then, we provide data specific to that Member that quantifies our findings alongside summary recommendations and connections to our suite of solutions and strategies. Simply put, Playbooks allow our Members to leverage their claims data and seize opportunities for savings.

There are three different types of playbooks: Participant Optimization, Medical Cost Intelligence, and Pharmacy Cost Intelligence.

Participant Optimization playbooks identify members who are Medicare eligible or COBRA and provide guidance to help them find better, more cost-effective options.

Medical Cost Intelligence playbooks include recommendations on site of care, mental/behavioral health analysis, benchmark reporting, and preventive care compliance.

Pharmacy Cost Intelligence playbooks include recommendations for formulary optimization, therapeutic interchange via brand-to-generic substitutions, and site-of-care steerage.


The three components of our ICM platform allow Members to take control of their healthcare spending. Members not only have access to data but also analysis and suggestions that allow them to make informed decisions on cost management, whether it be through switching from brand name to generic prescriptions or connecting with one of our integrated point solution partners to intervene on a specific claim.

To that end, cost management aids you in building a sustainable employer health plan, but we firmly believe that health care is not one size fits all. We offer options through our ICM platform that small and mid-sized employers would not have access to otherwise, but these are just options, not obligations. We encourage Members to work one-on-one with their consultants to personalize their benefits plan and develop a multi-year strategy to proactively tackle rising healthcare spend.

With the increasing frequency of high-cost drugs and procedures, self-funding can be daunting. On one hand, you get more control over your claims and only pay what’s incurred. On the other, you can have higher month-to-month volatility depending on the types of claims.

This is where an individual stop-loss policy comes in.

To recap, an individual stop-loss policy is a reinsurance policy available to self-insured groups that provides financial protection against those catastrophic claims that unfortunately come up from time to time.

Now that your refresher is complete, let’s learn about specific deductibles and aggregate attachment points – two critical components of stop-loss coverage.

Specific deductible

Your specific stop-loss policy places an individual specific deductible on every covered member. When a member’s claims exceed this point, the stop-loss carrier pays all claims beyond this amount for the remainder of the policy period.

Individual specific deductible levels vary significantly across groups, ranging from $30,000 to $1,000,000.

Let’s say ABC Company has elected a $50,000 specific deductible. In this scenario, the group is responsible for all claims for each covered plan member, up to $50,000. If a member has over $50,000 in accumulated claims, the stop-loss carrier takes on the financial liability and pays all subsequent claims in the policy period.

Here’s how that might work:

This deductible is set in advance and is an important term of your stop-loss contract (and an essential part of any self-funded plan), protecting the employer from costly claims stemming from any one individual. Groups can select the level that works for them.

Aggregate attachment point

When you purchase an individual stop-loss policy, you also purchase protection from individual large claim hits.

But you’re still responsible for all claims, for every member, up to the individual stop-loss level. These small claims or claims under the individual stop-loss level can quickly add up and sometimes be much higher than initially projected by the carrier.

To combat this, aggregate stop-loss insurance protects self-insured employers from financial losses due to a high volume of unexpected claims in a policy year. This policy provides a cap on your maximum claim liability for the plan year and goes hand in hand with your individual stop-loss policy. For instance, this pattern might occur during a very contagious flu season – more flu means more employee claims.

The aggregate attachment point is the key to protecting you from such high-numbered claims. Serving as the maximum claim liability, this point is determined by adding a risk corridor to the projected, expected claims.

Typically, the risk corridor is 25%.

Let’s suppose the carrier has determined your expected claim liability to be $1 million for the experience period, and you have a 25% risk corridor. Your attachment point would be $1.25 million ($1 million + 25%). In this instance, the most that you, the employer, would pay for all claims under the individual stop-loss level is $1.25 million.

To calculate a company’s aggregate attachment point and risk corridor, several factors must be considered, including:

One of the most significant benefits of the aggregate attachment point is that it gives you more control over your stop-loss coverage. You can tailor your stop-loss policy to fit your needs and create a budget based on the maximum amount you can cover annually.
Still, it can take time to predict how much your claims will cost.

Typical aggregate stop-loss policies also tend to limit coverage to a maximum of $1,000,000 or $2,000,000. If your claims exceed the aggregate attachment point and coverage limit, you can incur unexpected out-of-pocket costs