Reading the stop-loss terms on a level-funded quote

The two attachment points

Every stop-loss arrangement has two of them, and they answer different questions.

The specific deductible caps what the plan spends on any one member in the year. Set at 50,000 dollars, the plan pays the first 50,000 of one person's claims and stop-loss covers the rest. It is the protection against a single catastrophic case.

The aggregate attachment point caps total claims for the whole group, and it is normally expressed as a corridor above expected claims, commonly around 120 to 125 percent. It is the protection against a year in which nothing is catastrophic but everything is expensive. On a level-funded plan the fixed monthly payment is built to fund up to this point, which is what lets the arrangement be sold with a known maximum.

A lower specific deductible costs more premium and protects sooner. A lower aggregate corridor does the same at group level. When two quotes match on monthly cost, one of these two numbers is usually doing the work, and it is worth finding which before recommending either. The stop-loss calculator sizes both against a group's census and expected claims.

Contract basis: what 12/12 and 12/15 mean

Medical claims are incurred on one date and paid on another, often months apart. The contract basis says which claims the policy actually covers, written as two numbers: months of incurral, then months of payment.

• 12/12 covers claims incurred in the twelve-month year and paid within those same twelve months. Cheapest and narrowest. A claim incurred in month eleven and paid in month fourteen falls outside it.
• 12/15 covers claims incurred in the year and paid within fifteen months, giving three months of run-out.
• 12/18 extends that to six months, and is the usual choice for a group that expects to change carrier.
• 15/12 or 24/12 add run-in instead, covering claims incurred before the policy started but paid during it. This matters for a group arriving from a prior arrangement that left an unpaid tail.

The gap between contract bases is where uncovered claims live. A group changing carrier needs either run-out on the departing policy or run-in on the arriving one, and the two carriers will not coordinate that on the broker's behalf.

Terminal liability and aggregating specific

Terminal liability is the rider that extends payment coverage past the end of the contract, and it is the cleanest way to close a plan year on exit. Level-funded bundles frequently include some form of run-out protection. Confirm the wording rather than assuming the product handles it, because this is the term whose absence surfaces only when it is too late to buy.

An aggregating specific deductible is a pooled corridor sitting underneath the specific: the plan absorbs a shared amount across all large claims before specific stop-loss pays on any of them. It lowers premium and raises the employer's realistic worst case, and it is easy to miss because the headline specific deductible still reads as a normal number. If one quote is unexpectedly cheap, look here first.

Lasers

A laser assigns one member a higher specific deductible than everyone else, because the carrier knows about their claims. A group with a 50,000 dollar specific and one member lasered at 250,000 carries 200,000 dollars of extra exposure on a single life, and the illustration will not show it.

Three questions decide how much a laser matters. Which members are lasered and at what amounts. Whether the carrier may add new lasers at renewal, or has agreed to no-new-laser terms. And whether there is a rate cap, which limits how far the arrangement can be repriced after a bad year. No-new-laser and rate-cap provisions cost premium and are worth quoting explicitly for any group with known conditions.

Lasers are a renewal event as much as a quoting event, which is why the laser schedule belongs in every renewal file. That workflow is in how to present a level-funded renewal.

The questions to ask before a client sees a number

• What are the specific and aggregate attachment points, and is there an aggregating specific underneath the specific?
• What is the contract basis, and who covers run-out if the group leaves?
• Which members are lasered, at what amounts, and can new lasers be added at renewal?
• Is there a rate cap, and what triggers it?
• What share of surplus returns to the employer, when, and are there caps or clawbacks?
• How often are claims reported, in what format, and does the employer keep the data on exit?

Six answers per quote across three carriers is eighteen data points buried in eighteen different document layouts. Quote analysis pulls the terms into one comparable row per quote, and plan comparison puts them beside the plan designs, so the cheap quote with the aggregating specific does not win on its monthly figure alone.

Where this sits

For the funding mechanism itself rather than its contract terms, start at level-funded health plans explained. For whether the group should be level-funded at all, see level-funded vs self-funded. Short definitions of every term used here are in the benefits glossary.