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 regardless of when they were incurred. More favorable for employers — you're covered for claims from the prior year that are paid in the current year.
Run-out (incurred contract): Covers claims incurred during the policy year regardless of when they're paid. Less favorable — claims incurred in the last month of the year may not be paid until after the policy expires.
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: Carrier agrees to cover a claim that technically falls outside the contract terms. Valuable for borderline situations.
Minimum premium: The minimum stop-loss premium you pay regardless of claims experience. Protects the carrier from adverse selection.