Stop-loss contract terms: lasers, terminal liability, run-in and run-out.
The premium is the easy part of a stop-loss quote. The terms that decide whether a claim is paid, and when, sit in the contract: the claims basis, any laser, the terminal liability provision and the notice rules.
The terms that decide what gets paid.
Claims Basis
The basis states which claims count: incurred and paid in the contract period, or incurred in one period and paid in another. A longer paid window changes both the price and the protection.
Run-In
Run-in coverage counts claims that were incurred before the contract started but paid after. It matters when you move from another carrier or another stop-loss contract.
Run-Out
Run-out is the period after the contract ends when claims incurred during it can still be paid and reimbursed. A short run-out can leave claims uncovered.
Terminal Liability
Terminal liability describes who is responsible for claims incurred before termination but not yet paid. Some contracts exclude them, which makes ending the contract a financial event.
Lasers
A laser is a higher individual deductible placed on a named person with a known high-cost condition. It reduces your premium and leaves you carrying more of that person’s claims.
Notice and Reporting Rules
Contracts set deadlines to report large claimants and to file reimbursement requests. A late notice can reduce or forfeit payment.
Where these terms change the outcome.
These are the situations where a contract term turns into dollars.
Switching Carriers
Without run-in, claims incurred under the old arrangement but paid after the switch can fall between contracts. We check this before any change.
Ending the Self-Funded Plan
Terminal liability and run-out decide who pays claims after the plan ends. Plan the cost of the last months before you decide to leave.
A New Large Claimant
A claimant identified mid-year cannot usually be lasered mid-term, but can be at the next renewal. See our renewal guide for how that plays out.
Contracts That Look Alike
Two quotes with the same deductible can differ on basis, run-out and exclusions. The cheaper one may cover less.
Experimental and High-Cost Categories
Many contracts limit coverage for experimental treatments, transplants and certain drug categories. Read the exclusion list line by line.
Plan Document Alignment
Stop-loss follows the plan document. If the contract and the plan document disagree, the plan may pay a claim stop-loss refuses.
How we review a stop-loss contract.
Read It Against the Plan Document
We compare each exclusion and definition to the plan document so a covered claim is not left without reimbursement.
Map the Dates
We lay out the incurred, paid and run-out windows against your plan year and any prior contract so there are no gaps.
Decide on Lasers Deliberately
We show what a laser saves in premium against what it exposes you to, claimant by claimant, so the choice is yours and not a surprise.
Three questions to settle.
What Happens to Unpaid Claims If We Terminate?
Ask for the terminal liability and run-out provisions in plain terms and in dollars if you can.
Which Claimants Carry a Laser, and Why?
Get the list and the reason in writing, with the individual limit that applies to each.
What Are the Reporting Deadlines?
Ask when a large claimant must be reported and by when each reimbursement request must be filed.
Common Questions About Stop-Loss Terms
What does a 12/12 contract mean?
It generally means the contract covers claims incurred and paid within the same twelve-month period. Other bases, such as 12/15 or 24/12, extend the paid window or the incurred period.
Can a laser be removed later?
Sometimes, at renewal, if the claimant’s condition has changed or the carrier agrees. Do not count on it.
Is terminal liability the same as run-out?
They are related but different. Run-out is the extra time to pay claims after the contract ends. Terminal liability concerns who is responsible for claims left unpaid after termination.
Do these terms apply to level-funded plans?
Yes. Level-funded plans sit on top of a stop-loss contract and have the same questions, even if the sales material does not mention them.
Who negotiates these terms?
We do on your behalf, with the administrator and the stop-loss carrier, because the terms often matter more than the rate.
Can the carrier non-renew after a large claim?
Contracts set the renewal terms. Ask about renewal rate caps and non-renewal rights before you sign, not after a claim.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
29 U.S.C. § 1102 — ERISA requires a written plan instrument; stop-loss follows it.
29 U.S.C. § 1144(b)(2) — Why stop-loss is regulated as insurance while the plan is not.
This page is general information, not legal, tax or actuarial advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
Switch to CFH. Unhappy with your broker? Your employees won’t notice. You will. →
Cookies on This Site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential: needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics: tell us which pages get read, so we know what is worth writing more of.
- Advertising: set by third parties such as ad and social platforms to measure and target campaigns.