NJ Stop-Loss Bill Passed in Both Houses

What is Stop Loss Insurance?

Stop-loss insurance (also known as excess insurance) is a product that provides protection against catastrophic or unpredictable losses. It is purchased by employers who have decided to self-fund their employee benefit plans, but do not want to assume 100% of the liability for losses arising from the plans. Under a stop-loss policy, the insurance company becomes liable for losses that exceed certain limits called deductibles. There are two types of self-funded insurance:

• Specific Stop-Loss is the form of excess risk coverage that provides protection for the employer against a high claim on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total. Specific stop-loss is also known as individual stop-loss.
  
• Aggregate Stop-Loss provides a ceiling on the dollar amount of eligible expenses that an employer would pay, in total, during a contract period. The carrier reimburses the employer after the end of the contract period for aggregate claims.

A number of variations are available for each of these two products.

Generally, all but the largest employers will want to protect their plan with both specific and aggregate stop-loss coverage. Occasionally, circumstances may be such that specific stop-loss by itself will fulfill the employer’s need for protection.

New Jersey’s somewhat contentious stop-loss bill (A5095/S3270) passed in both the Senate and Assembly on January 13, 2020. The bill originally called for the complete prohibition of stop-loss policies in the New Jersey small group market. Passed by the legislature with amendments, stop-loss policies can still be sold to small employers. The stop-loss rating must be compliant with the NJ SEH Benefits Program and policies are subject to guaranteed renewal. Additionally, the following conditions will exist:

• A specific attachment point of no less than $40,000
• An aggregate attachment point of at least 140% of the expected claims per plan year

These provisions would apply to all stop-loss policies sold or in-force with small employers in New Jersey on or after April 1, 2020. The full bill can be found here. 

DGS Benefits, Inc is an independent insurance agency serving surrounding communities in New Jersey. . Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating the latest in technology-based tools and laws on healthcare, employee benefits, life insurance and finance, we keep our clients up-to-date with the plans that encompass all of their needs, whether it is individual or group insurance.

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