Question 1

How do I compare stop-loss carriers for my self-funded plan?

Accepted Answer

Evaluate stop-loss carriers on: financial strength (A.M. Best A- or better), claims payment history and speed, laser practices at renewal (frequency, magnitude, and whether laser-free contracts are available), contract terms (run-in/run-out provisions, terminal liability, contract basis), network of reinsurance, and premium competitiveness. Issue a stop-loss RFP annually or every 2–3 years. Your TPA or stop-loss broker should have relationships with multiple carriers to get competitive quotes.

Question 2

What is a laser in stop-loss insurance and how do I negotiate it?

Accepted Answer

A laser is a stop-loss provision that raises the specific deductible for a known high-risk individual — typically someone with cancer, organ failure, or another expensive condition. For example, a carrier may laser an individual from a $100,000 to $500,000 deductible. Negotiate laser limits (maximum laser amount), laser-free contracts (no lasers at renewal), or laser buyback provisions (pay additional premium to remove a laser). Laser-free contracts typically cost 5–15% more in premium but eliminate renewal uncertainty.

Question 3

What is the difference between paid and incurred contract basis for stop-loss?

Accepted Answer

Contract basis determines which claims are covered in a given plan year. Paid basis covers claims paid during the contract year, regardless of when they were incurred. Incurred and paid (I&P) basis covers claims both incurred and paid during the contract year. Run-in coverage extends the incurred period back to cover claims incurred before the contract year but paid during it. Run-out coverage extends the paid period forward to cover claims incurred during the contract year but paid after it. I&P with run-in/run-out provides the most comprehensive coverage.

Question 4

What is terminal liability in stop-loss insurance?

Accepted Answer

Terminal liability is the stop-loss carrier's obligation to pay claims incurred during the contract year but not yet paid when the contract terminates. If an employer switches stop-loss carriers, the outgoing carrier may have terminal liability for claims in process. Some carriers include terminal liability coverage; others require a separate run-out endorsement. Confirm terminal liability provisions before switching carriers — gaps in coverage can leave the employer exposed for claims in the pipeline.

Question 5

What A.M. Best rating should I require for stop-loss carriers?

Accepted Answer

Require a minimum A.M. Best financial strength rating of A- (Excellent) for stop-loss carriers. A- or better indicates strong financial capacity to pay claims. Carriers rated B++ or below carry meaningful insolvency risk — if the carrier becomes insolvent, the employer may not recover stop-loss reimbursements for catastrophic claims. For large employers with significant stop-loss exposure, consider requiring A (Excellent) or A+ (Superior) rated carriers.

Stop-Loss Carrier Profiles

Key evaluation criteria for stop-loss carriers

Stop-loss diligence scorecard

Contract protection

Laser discipline

Financial strength

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