Key Stop-Loss Contract Terms
| Term | Definition | Employer Impact |
|---|---|---|
| Run-in (paid basis) | Covers claims paid during the contract period, regardless of when incurred | Simpler; no run-in gap |
| Run-out (incurred basis) | Covers claims incurred during the contract period, regardless of when paid | Requires run-out coverage when changing carriers |
| Terminal liability | Coverage for claims incurred during the contract period but paid after termination | Critical when changing carriers |
| Lasers | Higher attachment point for specific members | Increases employer exposure for lasered members |
| Accommodation aggregate | Reduces aggregate attachment point when specific claims are high | Improves protection in catastrophic years |
Carrier Transition Risk
Changing stop-loss carriers creates transition risk — claims incurred under the old carrier but paid after the transition may not be covered. Terminal liability coverage from the old carrier or run-in coverage from the new carrier is essential to close this gap. Failure to address the transition gap can result in significant uninsured claims.
Contract Review
Pro Tip
Have ERISA counsel and a stop-loss specialist review your stop-loss contract annually. Key review areas: (1) run-in/run-out provisions; (2) laser amounts and conditions; (3) exclusions (gene therapy, GLP-1, experimental treatments); (4) aggregate attachment point and accommodation aggregate; and (5) terminal liability provisions. Contract terms that seem minor can have significant financial consequences.