An aggregate stop loss excess insurance policy for an employer is:

• A. Not legal in California
• B. Legal but the employer receives no credit against the security deposit
• C. Legal and reduces the amount of the security deposit
• D. Not required to be included on the Annual Report

Answer: (B)

The aggregate stop loss excess insurance policy provides a layer of financial protection for employers who self-insure their employee health benefits. This type of policy kicks in when the total claims for a specific period exceed a predetermined threshold, thus protecting the employer from catastrophic losses.

The assertion that this type of policy is legal but does not provide the employer with any credit against the security deposit is correct. Employers are usually required to maintain a security deposit to cover potential liabilities associated with their self-insured plans. However, having aggregate stop loss insurance does not typically influence the amount of that security deposit, as the insurance serves to mitigate risk rather than eliminate the need for financial assurance up front.

In contrast, the other options suggest misunderstandings about the legal status, financial implications, or reporting requirements of such policies. Understanding the nature of self-insurance and the role of aggregate stop loss insurance is crucial for employers looking to manage their liabilities effectively while remaining compliant with state regulations.