Employer-sponsored health care is one of the most costly and complicated issues facing businesses today. Rising costs and ongoing regulatory changes have led many employers to take a closer look at their medical coverage options, hoping to squeeze out any new efficiencies they can. Given this environment, it is no surprise that many employers are asserting more control over their health care expenses by self-funding their insurance plans.  

The benefits of self-funding are many, including lower health care expenses based on actual claims experience, control and customization of plans, no prepayment of coverage, and simplified state regulations and taxes. However, self-funded employers also assume the financial risk of their employees’ medical coverage and are responsible for paying claims as they are incurred. This additional risk can be daunting, especially for employers with smaller financial reserves and less cash flow. That’s why medical stop loss insurance — which reimburses employers when medical claims exceed a specific dollar amount — is a key component to most self-funded medical plans.  

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