An aggregate corridor is the difference between expected claims and the aggregate attachment point.
An employer may self-fund its health plan, if the expected claims of the group is a number that the employer can handle. In order to protect itself against actual claims exceeding expected claims, the employer will buy stop-loss insurance. There are two types of stop-loss insurance – specific and aggregate. Specific stop-loss insurance reimburses the employer when a plan participant incurs medical costs in excess of a certain amount, known as the specific attachment point. Aggregate stop-loss insurance reimburses the employer when all of the plan participants, in the aggregate, incur medical costs in excess of a much larger number, known as the aggregate attachment point.
The aggregate attachment point is an important number for both the employer and the insurance company. And it is both a maximum and a minimum. For the employer, it is the limit of the employer’s liability under its self-funded health plan. For the insurance company, it is the amount that the employer pays before the insurance company has to reimburse the employer.
The aggregate attachment point is based, in part, on the employer’s expected claims. It exceeds the employer’s expected claims. Premiums are often a function of by how much the aggregate attachment point exceeds the expected claims.
If, at the end of a plan year, the employer has incurred medical expenses in excess of the aggregate attachment point, the insurance company sends a check to the employer for the difference. If the employer’s total expenditure is less than expected claims, the employer has spent less than it budgeted. However, if the employer’s total expenditure falls within the aggregate corridor – that is, between the aggregate attachment point and expected claims - there is no reimbursement. The insurance company is happy; the employer not so much.