Excess and Stop Loss Insurance are forms of reinsurance purchased by self-insured employer plans (e.g., Individuals companies or Captives) to insure against catastrophic (individual claims) and aggregate losses.

The term Stop Loss is generally used by the self-insured industry to mean reinsurance for self-insured medical benefits in situations where a claim exceeds an attachment point (generally between $10,000 and $250,00 depending on the size of the plan) or the aggregated claims exceed a specified dollar figure over the life of the contract.

Self-insured workers compensation trusts use a similiar reinsurance product to transfer risk.

How Excess and Stop Loss works...

In general, employers pay a monthly premium into a trust (and directly or indirectly to the Excess or Stop Loss Reinsurer) for coverage.  The trust pays all claims. In the case of a Captive, payments are made from a trust set up in the name of its participating employers.

If an individual claim exceeds a specific dollar value (generally set between $10,000 and $250,000) called the "attachment point" or "specific stop loss," then the Stop Loss insurance reimburses the trust for the balance of the claim.  For instance, if a Captive with an attachment point of $100,000 is presented with a claim for $250,000, the Captive pays $250,000 from the trust and is reimbursed (usually annually) by the Stop Loss reinsurer for the $150,000.  The Captive puts the $150,00 back into the trust.   Captives also contract with a Stop Loss reinsurer to protect their aggregate claim costs over the period of the contract.

It seems clear that the self-insured plan (trust) that purchased the excess insurance is responsible for reporting the payment, judgment or award.

CMS is considering...

Early on, during the efforts to define the requirements for Mandatory Insurer Reporting, CMS decided that reinsurers would not be required to report; however, during a CMS Town Hall meeting a TPA representing excess liability and workers compensation insurance for school districts asked how the first and second levels would be reported.

This question is a non-sequiter given the description of the industry above and was perhaps posed by a TPA hoping to find additional business.  Hopefully, it will not lead CMS to change their mind about not requiring reinsurers to report.


In response to our article and contact with CMS, CMS has clarified as follows:

"Re-insurance, stop loss insurance, excess insurance, umbrella insurance, guaranty funds, patient compensation funds which have responsibility beyond a certain limit, etc. -- The key in determining whether or not reporting for 42 U.S.C. 1395y(b)(8) is required for these situations is whether or not the payment is to the injured claimant/representative of the injured claimant vs. payment being made to self-insured entity to reimburse the self-insured entity. Where payment is being made to reimburse the self-insured entity, the self-insured entity is the RRE for purposes of the payment made to the injured individual and no reporting is required by the insurer reimbursing the self-insured entity."