When a hospital decides to self-insure the health insurance that they provide for their employees, they hire a TPA to pay the claims and they buy stop loss, employer stop loss insurance, to protect themselves from catastrophic claims. The hospital will purchase two types of stop loss insurance: Specific Stop Loss and Aggregate Stop Loss. The Specific Stop Loss covers the hospital if they have an employee whose medical claims go way beyond what is expected (i.e. transplants, premature baby, and chronic condition) and exceed a defined dollar amount or Stop Loss Deductible. The Specific Stop Loss premium is very expensive.

Here is an example of how Specific Stop Loss Insurance works for a hospital:

Hospital “A” has an employee named V. V has cancer and he is treated at Hospital “A”, and his medical bills (full billed charges) are $200,000. The Specific Stop Loss deductible is $100,000. The Stop Loss insurer will reimburse the hospital $100,000.

On the surface, this sounds like a great scenario. But this is a hospital that is treating its own employee and generating a bill based on “full billed charges” to submit to the stop loss insurance company for reimbursement. The goal of the stop loss is to reimburse your actual costs that exceed the stop loss deductible. When a hospital bills “full billed charges,” this includes the cost plus the markup. Also, when a stop loss insurer pays out a claim, they will use this at renewal to increase the hospital’s stop loss rates.

Solution: Hospital “A” agrees to accept a per diem, or discount fee, for service (based on their actual costs) when one of their employees comes to them as a patient. By doing this, the hospital is now basing its reimbursement on its costs, not profit plus cost, which are full billed charges. By designing the stop loss insurance in this manner, the premiums will be lower, as will the claims.

Example of the ideal stop loss coverage structure:

For all care delivered at Hospital “A,” the stop loss will pay 30 percent of billed charges; at all other facilities it will be 100 percent of the paid amount.

This will lower the cost of the stop loss insurance for the hospital by 20 to 40 percent. This also depends on whether the hospital incentivizes their patients to use their facility by offering hire benefits when they do so. The savings will come from the fact that the stop loss insurer will know if a patient comes to Hospital “A,” it result in the insurer having a lower cost of claims and lower exposure from claims occurring.

We are not defining coverage in this blog. Your policy is your final authority.

HCP National is a Stop Loss Insurance Company or Broker. We have placed over $250,000,000 in stop loss premiums since our founding.

How to find the best stop loss rates:

To find the best rates for hospital stop loss insurance, it is a good idea to contact a reputable insurance brokerage, such as HCP National.

At HCP National, our number one goal is to help you decrease your costs and improve your coverage. We built our insurance brokerage by helping our clients identify areas where they can save money, while keeping their organization fully covered.

Click here to contact us regarding your stop loss coverage. Our sole purpose is to ensure that you receive the best service and coverage possible, at an affordable and competitive rate.