Stop-loss insurance

Stop-loss matters to a PEO buyer because some PEO health arrangements are self-funded: the plan pays claims from its own funds and buys stop-loss to cap catastrophic exposure, rather than transferring all risk to an insurance carrier. A self-funded arrangement sponsored across multiple client employers can be a MEWA, with its own regulatory and solvency questions. The word "insured" in a sales conversation can refer to the stop-loss layer, not to your employees’ claims, so the funding structure is worth pinning down.

If a PEO plan is self-funded, ask three things: who bears the claims risk between the attachment point and the stop-loss (the PEO, a trust, or effectively the clients through future rates), which carrier writes the stop-loss and at what specific and aggregate attachment points, and what happens to run-out claims (claims incurred before you leave but paid after). Fully insured arrangements make those questions unnecessary, which is itself useful information when comparing proposals.