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Stop-loss Insurance

If you are interested in engaging in risk contracting, you should consider whether or not you need to purchase stop-loss insurance.  Stop-loss insurance helps protect you against losses associated with catastrophic cases. e.g., transplants, severe trauma, or neonatal intensive care.  Stop-loss insurance establishes a maximum threshold amount beyond which you will no longer be financially responsible for the costs of treatment.

Chapter nine: Stop-loss insurance

Whether or not you need to purchase stop-loss insurance will depend on the type and amount of risk you are assuming.  If you are a capitated primary care physician, your need for stop-loss coverage may be lower than that of other physicians.  This is because the treatment for catastrophic conditions, which are likely to require significant specialty services, will probably fall outside of your contract.  But if you are involved in taking capitation for primary care and specialty services, or capitation for physician and hospital services, your need for stop-loss protection is likely to be much greater.  Whether or not your participation in other types of risk arrangements, e.g., shared savings, withholds and risk pools, or bundled payments necessitates the purchase of stop-loss coverage will depend on the specifics of each arrangement.  And in some cases, you may be better off carving out some high-cost conditions or services rather than assuming risk for those services and purchasing associated stop-loss protection.  An actuary can help you determine the extent to which a particular risk arrangement may call for stop-loss protection or when a carve-out may be preferable. 

If you decide that you need stop-loss coverage, the crucial question is the amount of coverage you should purchase.  The amount of coverage will depend on factors such as: how many patients will be under risk arrangements; the types of items and services that will be subject to the risk arrangement, e.g., whether you will be at risk for physician services only or at risk for physician and hospital services.  An actuary can help you decide how much stop-loss coverage you may need.  For further information concerning how to be utilize an actuary, please see chapter ten, “Working with actuaries.” 

If you have not previously participated in a risk arrangement, or are thinking about taking on more risk, you may need help evaluating whether or not you need to purchase stop-loss coverage, and, if so, how much coverage will be sufficient.  To help in your evaluation, the AMA has developed a resource entitled "Evaluating & Negotiating Emerging Payment Options." This resource discusses in detail a wide range of risk arrangements, e.g., capitation, bundled payments, shared savings, withholds and risk pools.  This resource also contains practical guidance concerning how to evaluate risk arrangements offered to you and then manage any risk you ultimately decide to assume.  One chapter is dedicated to providing you with practical guidance that will help you determine if you should purchase stop-loss coverage, how to evaluate stop loss policies, and how much coverage you may want to purchase.

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