Which stop-loss term describes pricing a claim using a different mechanism when the charges exceed a threshold?

Which stop-loss term describes pricing a claim using a different mechanism when the charges exceed a threshold?

• A. Per-diem Stop-Loss
• B. First-dollar Stop-Loss
• C. Second-dollar Stop-Loss
• D. Third-dollar Stop-Loss

Answer: (B)

In stop-loss agreements, the way costs are priced changes once charges pass a certain threshold. The term described here—pricing a claim using a different mechanism when the charges exceed the threshold—fits first-dollar stop-loss. It means that once the total charges go beyond the retention, the excess is handled under a separate pricing method starting from the first dollar of that excess, rather than continuing under the normal pricing approach. Per-diem stop-loss focuses on daily amounts, and second-dollar or third-dollar notions aren’t standard terms for this mechanism, so they don’t match the described idea as well.

In stop-loss agreements, the way costs are priced changes once charges pass a certain threshold. The term described here—pricing a claim using a different mechanism when the charges exceed the threshold—fits first-dollar stop-loss. It means that once the total charges go beyond the retention, the excess is handled under a separate pricing method starting from the first dollar of that excess, rather than continuing under the normal pricing approach. Per-diem stop-loss focuses on daily amounts, and second-dollar or third-dollar notions aren’t standard terms for this mechanism, so they don’t match the described idea as well.