Medical Insurance Stop Loss Definition
To get the right medical insurance plan, you must have a good understanding of how
a stop loss or out of pocket maximum affects what you will need to pay. You should know what expenses it restricts and what it does not limit, the 2 calculation methods and how the limit is applied to plans covering more than one person.The two terms stop loss and maximum out of pocket maximum are used interchangeably in the insurance industry. Both terms will be used in this article.
The stop loss provision of a medical insurance contract is important because it limits your medical expenses in situations were one's medical bills are very high. Your medical insurance contract probably has a coinsurance provision that requires that you pay a percentage of medical bills after you have met your deductible. Without the maximum out of pocket or stop loss provision, you could wind up paying 20% of a very large expense. Fortunately most contracts have out of pocket maximum provisions that protect the consumer.
Your maximum out of pocket provision will apply to a 12 month's worth of costs. The 12 month period however, may start on January first or on your policy's anniversary date. You will have to ask your agent or review the policy's documentation to determine when the 12 month period starts for the purposes of calculating your stop loss.
There are also 2 methods of calculating your maximum out of pocket. With one both the deductible and coinsurance are included in the calculation. With the other only the coinsurance is included.
Not knowing how a contract calculates their stop loss can cause you to believe that a contract is better or worse than it actually is. One policy may express its stop loss as $1500 and another may express its maximum out of pocket as $2500. If both contracts have deductibles and the one with the higher stated limit includes the deductible in its calculation but the other does not, you can be easily misled.
The term stop loss can be misleading because reaching the stated dollar amount it doesn't mean that you will have no more medical bills for the rest of the 12 months. Co-pays are usually not limited by your coinsurance limit or out of pocket maximum. If your contract requires that you pay a co-pay for doctor visits you will probably continue paying those even after you have reached your out-of-pocket maximum.
If you purchased a plan with other members of your family, it is important to know what your stop loss is for each family member as well as for the family as a whole. Each family member may have a separate out of pocket maximum to meet. All family members' medical costs may contribute to one family maximum out of pocket. Each member may have a separate limit that not all have to meet if the family stop loss has been met earlier in the 12 month period.
Knowing what a out of pocket maximum is and what it limits is crucial if you want to select the best plan for yourself. Ignoring this part of your plan can cause you to buy the wrong policy or cause you to wind up with a large, unwanted and unexpected medical bill.
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