Contracts
Stop-Loss Contract Terms Every Employer Should Know
Stop-loss contracts are complex documents with terms that significantly affect your coverage, cash flow, and renewal risk. Understanding these terms before you sign is essential.
Key contract terms
Run-in (paid contract): Covers claims paid during the policy year, which may include claims incurred in a prior period. The actual reimbursement depends on the specific incurred-and-paid windows, contractual definitions, transition arrangements, and policy exclusions — the value of a paid basis depends on the employer's prior and following policy.
Run-out (incurred contract): Covers claims incurred during the policy year, which may be paid after the policy period ends. The reimbursement window depends on the specific paid period in the contract. A 12/15 contract provides a different type of timing protection than a 15/12 contract; neither can be judged in isolation from the employer's previous or following policy. Employers changing carriers should evaluate both outgoing and incoming contract bases together.
Advance funding: Carrier advances claim payments before reimbursement, improving cash flow. Particularly valuable for smaller employers who can't front large claim payments.
Specific deductible (attachment point): The per-member amount you pay before stop-loss kicks in. This is the most important financial term in the contract.
Aggregate attachment point: The total plan claims threshold (typically 115–125% of expected claims) above which the aggregate carrier pays.
Laser: A higher specific deductible imposed on a known high-cost individual. See our lasers guide for negotiation strategies.
Accommodation: In stop-loss administration, aggregate accommodation commonly refers to advancing aggregate reimbursement cash flow under specified circumstances — it is not the same as a carrier agreeing to waive a coverage exclusion. Discretionary coverage exceptions are a separate concept. Employers should confirm in writing what their contract's accommodation provision actually covers.
Minimum premium: The minimum stop-loss premium you pay regardless of claims experience. Protects the carrier from adverse selection.