What does a stop-loss limit in a major medical policy indicate?

A stop-loss limit in a major medical policy signifies the maximum amount that an insured individual is required to pay out of pocket for covered medical expenses within a specific time period, typically a calendar year. Once this threshold is reached, the insurance company will cover 100% of any additional covered healthcare costs for the remainder of that period. This mechanism is designed to protect policyholders from excessive financial burden due to high medical expenses, providing a safety net and ensuring that they do not face unlimited out-of-pocket costs.

Other options present concepts that do not accurately describe the function of a stop-loss limit. For instance, the minimum amount paid by the insured does not relate to a stop-loss provision, as this typically pertains to deductibles or co-pays. The total premium paid by the insured also does not have a connection to a stop-loss limit, as premiums are distinct from out-of-pocket costs related to claims. Lastly, limiting the term to only medication costs misrepresents the nature of a stop-loss limit, which applies to all qualifying medical expenses, not just prescriptions.