Health Insurance Mastery Practice Exam

What type of provision does a major medical policy that pays 100% of covered expenses above a specified amount contain?

1. Maximum benefit provision

2. Stop loss provision

3. Deductible provision

4. Lifetime limit provision

The correct answer is: Stop loss provision

A major medical policy that covers 100% of expenses above a specified amount features a stop loss provision. This provision is designed to protect policyholders from catastrophic financial loss by capping the amount they would have to pay out-of-pocket for medical expenses within a given year. Once the insured has paid a predetermined amount, typically through deductibles and coinsurance, the insurance company takes over and pays all subsequent covered expenses, effectively stopping the financial burden on the policyholder beyond that point. This mechanism ensures that while the insured is responsible for some initial costs, they are safeguarded against ongoing high expenditures. It is a crucial feature in major medical policies, ensuring that individuals do not face unlimited financial liabilities due to high medical bills, which can be a significant concern with severe or chronic health issues. Understanding the function of the stop loss provision highlights its importance in managing health care costs and providing financial security, which is a fundamental aspect of health insurance policies.