Last reviewed: 16 September 2026

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Stop-loss insurance: still an insurance product, still a licensed sale

Our group health broker disclosure explainer covers a federal rule that runs to the employer sponsoring a plan. This page is about a different, narrower piece of that same world: stop-loss insurance, the policy an employer that self-funds its own health plan buys to cap its own exposure — a genuine insurance product, sold by a licensed producer, that most employees never hear about because it never touches them directly.

What stop-loss insurance actually is

A "self-funded" employer health plan pays its employees' medical claims out of the company's own funds rather than paying premiums to a traditional insurer for fully-insured coverage — a structure larger employers commonly use, in part because self-funded ERISA plans are exempt from certain state insurance mandates that apply to fully-insured coverage. To cap the risk that structure creates, the employer typically buys stop-loss insurance from a separate insurer: "specific" (or individual) stop-loss reimburses the plan once one person's claims in a plan year cross a set dollar threshold; "aggregate" stop-loss reimburses the plan once the whole group's total claims cross a separate, higher threshold. Either way, the stop-loss carrier is bearing real insurance risk on the employer's own claims exposure — which is exactly why the policy is itself a form of insurance, not a side contract that happens to be claims-related.

It's sold by a licensed producer, not just negotiated in HR

Whoever places a stop-loss policy still needs an active producer license covering the right line — but which line that is isn't uniform nationally. Some states treat stop-loss as an accident and health product and require that line of authority; others classify and regulate it as a casualty line instead, sometimes while also letting a health-licensed producer write it. Either way, the underlying point holds everywhere: it's a specific, checkable line on a license (see our lines-of-authority explainer for why the specific line matters, not just an "active" status), not something a third-party administrator handling a self-funded plan's claims can place just because it already services that plan. The stop-loss carrier appointing that producer is the same appointment mechanic our appointment-verification guide covers everywhere else — a broker marketing a specific stop-loss carrier's coverage should have a real, filed appointment behind that claim, not just a relationship implied in a proposal.

Why minimum attachment points exist

If an employer set its stop-loss attachment points low enough, a "self-funded" plan can start functioning, in substance, almost identically to ordinary fully-insured coverage — while still claiming the regulatory treatment (and state-mandate exemptions) that only genuine self-funding is supposed to get. The NAIC's Stop-Loss Insurance Model Act (Model #92), first adopted in 1995 and revised in 1999, responds to that by setting minimum attachment-point floors a compliant stop-loss policy has to meet: under the model's own baseline, a specific (per-person) attachment point can't be set below $20,000, and for a group of 50 or fewer members, the aggregate attachment point has to be at least the greatest of $4,000 times the number of covered members, 120% of expected claims, or $20,000. State adoption of this model varies — some states have enacted close to the NAIC's own figures, others have written their own stop-loss statute with different thresholds, and not every state regulates stop-loss attachment points at all — so the specific minimum that actually applies to a given policy is a state-by-state question, verified against that state's own stop-loss statute rather than assumed from the model act's baseline.

What this means if you're checking a broker who places stop-loss coverage

The same two checks this site applies to any other producer relationship hold here: an active license covering whichever line that state actually requires for stop-loss, and a real appointment with the specific stop-loss carrier being proposed — both verifiable the same way our general licensing guide describes. If attachment points on a proposed stop-loss policy look unusually low for the group's size, that's a fair, specific question to raise directly with the broker or, if needed, the state Department of Insurance — not a judgment this site makes about whether any particular arrangement is compliant, but a concrete, checkable detail worth asking about before signing.