Which statement best describes the effect of an aggregate stop loss policy on the security deposit?

Which statement best describes the effect of an aggregate stop loss policy on the security deposit?

• A. Not legal in California
• B. legal and the excess policy reduces the security deposit
• C. legal but the ER receives no credit against the security deposit
• D. Not required that the ER include it on the Annual Report

Answer: (D)

Aggregate stop-loss arrangements are a risk-transfer tool, not a credit against regulatory requirements for the security deposit. In California self‑insured plans, the security deposit is a regulatory cushion to cover potential claim liabilities, and simply having an aggregate stop-loss policy does not change that deposit or how it is reported. The stop-loss policy does its job by capping total losses from the group, but it isn’t something that the regulator requires to be reflected as a credit against the security deposit, nor is it required to be shown on the ER’s Annual Report. Therefore, the statement that best describes its effect is that there is no requirement to include the aggregate stop-loss policy on the Annual Report.

Aggregate stop-loss arrangements are a risk-transfer tool, not a credit against regulatory requirements for the security deposit. In California self‑insured plans, the security deposit is a regulatory cushion to cover potential claim liabilities, and simply having an aggregate stop-loss policy does not change that deposit or how it is reported. The stop-loss policy does its job by capping total losses from the group, but it isn’t something that the regulator requires to be reflected as a credit against the security deposit, nor is it required to be shown on the ER’s Annual Report. Therefore, the statement that best describes its effect is that there is no requirement to include the aggregate stop-loss policy on the Annual Report.