Regarding stop-loss reinsurance for self-funded health plans, which statement is correct?

The correct statement about stop-loss reinsurance for self-funded health plans is that the stop-loss contract is typically limited to one year. This duration aligns with the nature of self-funded health plans, where employers seek to manage their financial risk associated with unpredictable claims by purchasing stop-loss insurance to provide coverage for catastrophic or excessively high claims.

One reason the one-year limit is significant is that these contracts allow insurers to reassess risks every year based on the claims experience of the self-funded plan. This frequent reassessment means that premiums and terms can be adjusted annually to reflect any changes in the claims environment or the overall health of the covered population. Many self-funded employers prefer this annual renewal to ensure that they are not locked into long-term contracts that may not fit their changing needs or financial conditions.

In contrast, lasering, which would involve excluding high-risk individuals from coverage, is not accurate in this context as it pertains to specific risk management rather than the duration of contracts. It's also important to note that while stop-loss reinsurance is regulated at both state and federal levels, the emphasis on state regulation is not a complete picture. The assertion that contracts often last multiple years contradicts the typical approach of annual contracts.