Kids and Health Care: Stop-Loss Provision

As we've noted, co-insurance is the other cost that affects the price of insurance. The normal co-insurance formula is that you have to pay 20 percent of UCR fees, after deductibles and other adjustments are applied. But your portion can be higher -- 30 or even 40 percent. In some cases, you might choose to absorb more in order to make your monthly premiums lower; in others, the insurance company may only be willing to write the policy if you agree to take a larger portion of any expenses.

You can cap your liability by adding a stop-loss provision to your policy. The stop-loss is the point at which the insurance company begins to pay 100 percent of a claim. Without a stop-loss, you would be responsible for 20 percent of an indefinite amount such as $100,000 or even $1 million.

Stop-loss limits vary. They usually range from $5,000 to $20,000...though some policies have higher ones. For example, a plan with a $500 deductible and an 80/20 percent co-insurance split on the next $5,000 of covered expenses would result in a total out-of-pocket expense to you of $1,400 -- the $500 deductible plus 20 percent of the remaining $4,500.

The out-of-pocket maximum is a major consideration when shopping for a policy. Regardless of the size of a potential claim, the most that you will have to pay out of your own pocket is the deductible and the co-insurance amount up to the stop-loss.

The stop-loss point is also a contributing factor in the policy's premium. The higher the stop-loss-the lower the premium. A stop-loss at $2,500 will cost more than a stop-loss at $10,000.