Stop-Loss Insurance: Are You Overpaying for Protection?

The Stop-Loss Market Has Changed

Stop-loss insurance, the safety net that protects self-funded employers from catastrophic claims, has seen dramatic price increases since 2022. Carriers have tightened terms, raised lasers, and increased specific deductibles. But not all employers are impacted equally.

Why Most Employers Overpay

Many employers rely on their broker to market stop-loss annually. But some brokers have preferred carrier relationships that limit the number of competitive bids. Others have not optimized the plan structure (specific deductible, aggregating specific, or aggregate attachment point) to match the employer's actual risk profile.

What to Evaluate

• Specific deductible level: A $50,000 vs $150,000 specific deductible can mean a 40-60% premium difference
• Laser management: Are known high-cost claimants being lasered appropriately, or is the carrier using lasers to inflate premiums?
• Terminal liability: Run-out provisions can leave employers exposed to hundreds of thousands in claims after plan termination
• Contract terms: 12/12 vs 12/15 vs 15/12 contract basis significantly impacts when claims are covered

How the Annual Marketing and RFP Process Works

Stop-loss is generally marketed once a year, well before the plan renewal. The broker prepares a census of covered lives, summarizes recent claims experience, and circulates a request for proposal to a panel of stop-loss carriers. Carriers respond with quotes that include a specific deductible, rate, and laser schedule, and the employer selects an option. The depth of competition depends heavily on how many carriers actually see the risk. A broker who sends the RFP to only a small panel, or who negotiates terms informally without a formal quote comparison, can leave meaningful premium differences on the table. A well run marketing process should include a clear summary of plan design, a complete claims history, and a side by side comparison of net cost after lasers and administrative fees.

Specific vs Aggregate Stop-Loss: What Each Layer Covers

Specific stop-loss, also called individual stop-loss, reimburses the plan once any single claimant's covered claims exceed the specific deductible. Aggregate stop-loss caps total eligible claims for the entire covered population above an aggregate attachment point, usually expressed as a percentage of expected claims. Specific coverage protects against one person experiencing a catastrophic condition. Aggregate coverage protects against the plan as a whole having a bad year. Because the two layers address different risks, the structure must be reviewed together. A plan with a very high specific deductible and a low aggregate attachment point may trade per person protection for broader population risk, while the reverse may expose the plan to large individual claims.

Lasers, No New Lasers, and Laser Management

A laser is a condition or individual excluded from the standard specific deductible, meaning the plan must pay a higher amount before stop-loss reimburses. Lasers are common when a claimant has a known ongoing high cost condition. A "no new lasers" provision means the carrier will not add new lasers at renewal for conditions that were already known and covered under the expiring policy, which can protect the plan from sudden increases in out of pocket exposure. Plan sponsors should ask whether lasers are being applied consistently with the carrier's underwriting guidelines, whether they can be removed if claims improve, and whether the renewal proposal includes any new lasers.

Gapless Coverage, Runout, and Contract Turnover

When a plan changes stop-loss carriers, the transition period creates two exposures. First, the old policy may not cover claims incurred before termination but paid after termination, a runout gap. Second, the new policy may not cover claims incurred before its effective date, creating a gap in coverage. Gapless coverage, also called run in protection, bridges this period by ensuring claims incurred under the prior contract and paid under the new contract remain eligible. Plan sponsors should confirm whether the new carrier offers gapless coverage, how long the runout period extends, and whether terminal liability is included or must be purchased separately.

Questions a Plan Sponsor Should Ask

• How many carriers received the most recent RFP, and were all quotes presented in a comparable format?
• What is the net premium after lasers, administrative fees, and commissions?
• Does the renewal include any new lasers or changes to the aggregating specific deductible?
• Are terminal liability and gapless coverage included at no extra cost or available as riders?
• How does the current specific deductible and aggregate attachment point compare with the employer's actual claims experience?

When an Independent Review Is Worth Doing

An independent review is especially valuable when premiums have risen sharply, when the broker has not produced a multi carrier comparison, when lasers have been added or increased, or when the plan is changing carriers. It is also useful before a renewal negotiation, after a large claim, or when the employer has not benchmarked terms in several years. Because stop-loss pricing is not standardized, a fresh look at contract basis, lasers, and layer structure can reveal whether the current arrangement matches the employer's risk profile and budget.

The Independent Advantage

An independent stop-loss analysis, separate from your broker's marketing, benchmarks your current terms against the broader market and identifies whether your structure matches your risk. Employers who independently review stop-loss typically save 12-25% on premium while maintaining equivalent protection.