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Medical stop-loss: terms to check before you buy
Medical stop-loss insurance protects a self-funded employer, not plan members, against high health-claim costs. Specific stop-loss reimburses the employer for any one person's claims above a set attachment point; aggregate stop-loss reimburses total plan claims above a set annual level.
Specific and aggregate protection for self-funded employers against large or accumulating health claims.
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How are these providers ranked?Stop-loss terms to verify
Two policies with the same attachment point can pay very differently. Ask for the policy form, not only a proposal summary, and read it alongside your plan document so the definitions match.
| Term | What to confirm |
|---|---|
| Specific attachment point | The per-person amount above which the carrier reimburses, and whether it varies by person |
| Aggregate attachment point | How the annual level is calculated and any corridor above expected claims |
| Contract basis | Which claims count, by when they are incurred and when they are paid. The first number is the months of incurred claims, the second the months in which they must be paid: 12/12 covers claims incurred and paid in the same 12-month period; 12/15, 12/18 and 12/24 add 3, 6 or 12 months after the period to pay claims incurred within it (run-out); a paid contract such as 15/12 covers claims paid in the year, including some incurred up to 3 months before it began (run-in). Carriers label these differently, so compare the actual incurred and paid dates in each proposal. |
| Lasers and exclusions | Any individuals or conditions with a higher attachment or no cover |
| Renewal terms | Rate caps, no-new-laser provisions and notice periods |
| Reimbursement | How quickly claims are reimbursed and whether advance funding is available |
Your TPA, a benefits consultant and counsel who reads the policy against the plan document are the usual specialists. Whether the arrangement sits inside a captive is a separate structural question.
Benefits and limitations
Potential benefits
- Makes self-funding workable for employers that could not absorb a single catastrophic claim.
- Attachment points can be set to match the employer's risk tolerance and cash position.
- Aggregate cover limits the total cost of the plan year, even when individual claims are unpredictable.
- Can be bought directly from a carrier or, for some employers, through a group captive program.
Key considerations and limitations
- It reimburses the employer; it does not replace the plan's obligation to pay members' claims.
- Attachment points set too low erode the economics of self-funding; set too high, they leave real exposure.
- Contract terms — the claims period covered, lasers on known high-cost individuals, exclusions — decide what is actually paid.
- Renewal pricing can move sharply after a bad claims year, and some states set minimum attachment points.
Is this relevant to me?
When it may be worth exploring
- You self-fund, or plan to, and need to cap catastrophic exposure.
- You want to choose your own retention rather than accept a fully insured carrier's blended price.
- Your claims history is documented well enough to be underwritten.
When it may not fit
- The plan is fully insured, so there is no self-funded exposure to protect.
- The group is too small or new for credible pricing.
- No one will review contract terms closely enough to know what the policy will pay.
Providers for Medical Stop Loss
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