Can you explain what ‘stop loss’ means?

Stop loss is a term used in the insurance industry that refers to the maximum amount of money that a policyholder will have to pay out-of-pocket for covered medical expenses in a given period, usually a year. Once the policyholder has reached the stop loss amount, the insurance company will start paying for all covered medical expenses for the rest of the year. Stop loss is particularly relevant to health insurance plans with high deductibles, which require the policyholder to pay a certain amount of their medical expenses out-of-pocket before the insurance company starts paying. The stop loss amount is usually set higher than the deductible, so once the policyholder has reached the stop loss, they will have paid the maximum amount out-of-pocket for covered medical expenses. For example, if a health insurance plan has a stop loss of $5,000 and a deductible of $2,000, the policyholder will be responsible for paying the first $2,000 of covered medical expenses. Once they have paid $2,000, the insurance company will start paying a portion of the medical expenses. However, if the policyholder incurs $5,000 or more in covered medical expenses during the year, they will have reached the stop loss, and the insurance company will pay for the rest of their covered medical expenses for the rest of the year. Stop loss can also refer to a type of insurance policy that provides protection against catastrophic losses for employers who self-insure their employees' health benefits. In this case, the stop loss insurance policy would cover the employer's expenses once they exceed a certain amount, which is called the stop loss level.