In simple terms, an “attachment point” is the point at which one person’s liability for claims ends and another person’s begins. However, the meaning of an attachment point depends upon the context in which it is used. For example, in the context of self-funded health plans, the attachment point is the amount that the employer has to pay before the employer’s stop-loss insurance kicks in. There are two types of attachment points in stop-loss insurance – specific and aggregate.
Stop-loss insurance protects an employer from catastrophic claims, both on a per participant basis and for the plan as a whole. Specific stop-loss insurance covers claims incurred by a single participant above a certain amount. That amount is the specific attachment point. Let’s assume that an employer’s stop-loss insurance has a specific attachment point of $50,000. That means that the employer is solely responsible for medical claims of a single participant up to $50,000. Once that participant’s medical claims exceed $50,000, the employer would be reimbursed by its stop-loss insurance. In this context, specific means single.
The aggregate attachment point limits an employer’s exposure for medical claims incurred by the plan as a whole. If the aggregate attachment point is $500,000, that means that, once the employer has paid medical claims of $500,000 in total, the employer will be reimbursed by stop-loss insurance for any additional expenses. The aggregate attachment point limits the employer’s liability even if one or more individual participants has not reached the specific attachment point. So, for example, let’s assume that the employer has twenty participants in its plan. If ten of those participants incur medical expenses of $50,000, for a total of $500,000, the employer will have reached its aggregate attachment point. From that point forward, stop-loss insurance will reimburse the employer for medical expenses incurred by the plan’s participants, even though ten participants have not incurred expenses in excess of $50,000.
Attachment points can vary from policy to policy and are subject to negotiation between the insured and the insurer. They are a product of the insured’s appetite for risk. However, in the context of self-funded health plans, some states impose minimum attachment points.
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