What is an essential feature of specific stop-loss coverage reinsurance?

Specific stop-loss coverage reinsurance is designed to protect an insurance plan or an employer from high costs that may be incurred from a particular individual’s claims. This coverage sets a limit on the amount that a plan will pay for a single individual's health care expenses during a specified period, typically one year.

By establishing this limit, the employer can manage the financial risk associated with claims that exceed a certain threshold for any one person. This is crucial for risk management, as it provides the employer with predictability in budgeting and helps safeguard against catastrophic losses. The essence of specific stop-loss coverage is thus centered on limiting the costs related to individual high claims, ensuring that while employees may require extensive medical care, the financial burden on the employer remains controlled.

In contrast, options that refer to costs associated with the entire employee population or suggest that the coverage is only available for fully insured plans do not properly capture the nature of specific stop-loss coverage. This coverage specifically targets individual claims rather than collective costs or insurance structure limitations. Therefore, the focus on limiting costs for each employee's health care effectively encapsulates the core purpose of specific stop-loss coverage.