Glossary of Stop-Loss Insurance Terms

Understanding the language of stop-loss insurance is key to making informed decisions. Explore this glossary for clear explanations of the terms and concepts that matter most to brokers and employers.


General Key Terms

Laser:

A laser is when the stop-loss insurance carrier identifies a specific individual within a group who is expected to have high medical costs (often due to a known serious medical condition). For this individual, the insurance carrier sets a higher specific deductible than for the rest of the group.

When ERP offers “no new lasers at renewal,” it ensures stability in coverage by not introducing higher deductibles for specific individuals upon policy renewal, even if they develop high-cost conditions.

Stop-Loss Insurance:

Stop-loss insurance protects self-funded employers from catastrophic medical claims by reimbursing costs that exceed a predefined limit.

For instance, if an employee incurs $500,000 in medical costs and the company’s stop-loss deductible is $100,000, stop-loss insurance reimburses $400,000.

Aggregate Stop-Loss:

A policy that caps total claims costs for an entire group and reimburses if the total claims exceed a set threshold.

Specific Stop-Loss:

A policy that protects against high claims from a single individual by setting a specific deductible for each covered person.

Distribution:

The sales and marketing activities involved in offering and selling stop-loss products to clients, such as employers or third-party administrators.

This includes responding to RFPs, building broker relationships, and educating clients on stop-loss options.

Reference-Based Pricing (RBP):

A healthcare cost containment strategy where employers pay for medical services based on a fixed percentage above Medicare reimbursement rates or another benchmark.

This helps reduce overall healthcare costs compared to traditional pricing models.

PPO (Preferred Provider Organization):

A health plan where coverage is provided through a network of preferred doctors and hospitals at discounted rates.

Third-Party Administrator (TPA):

Organizations that handle administrative tasks for self-funded health plans, such as claims processing, billing, and customer service.

Shared Risk/Reward:

A health plan where coverage is provided through a network of preferred doctors and hospitals at discounted rates.

PPO (Preferred Provider Organization):

A health plan where coverage is provided through a network of preferred doctors and hospitals at discounted rates.

Alternative Stop-Loss Arrangements

Captives:

A form of self-insurance in which a group of companies creates their own insurance entity to provide coverage for their collective risks.

ERP offers tailored captive programs to meet specific organizational, geographic, or industry needs.

Pooled Stop-Loss Programs:

Arrangements where multiple employers combine their stop-loss coverage into a single pool.

This helps spread risk and stabilize premiums without creating a separate insurance entity.

Level-Funded Products:

A type of self-funded health plan where employers pay a set monthly amount that includes expected claims costs, stop-loss premiums, and administrative fees.

If claims are lower than expected, the employer may receive a refund.

 

Transitional Stop-Loss Programs:

Products designed to help employers transition from fully insured plans to self-funded arrangements, often including safeguards against unexpectedly high claims.

Contract Features and Administration

Advanced Funding:

A stop-loss feature that provides upfront reimbursement for large claims, ensuring employers have immediate funds to cover high-cost expenses.

Gapless Renewals:

A provision ensuring seamless coverage during policy transitions, avoiding gaps in protection.

Terminal Liability Option (TLO):

An optional provision extending coverage for claims incurred during the policy period but filed after it ends.

Run-In Contract:

A stop-loss policy that covers claims incurred before the policy start date but paid afterward, ensuring protection during transitions.

Run-Out Contract:

A policy feature covering claims incurred during the policy period but paid after the policy ends, protecting against late-arriving claims.

Waiver of Actively-at-Work:

A provision maintaining coverage for employees not actively working due to disability, leave, or similar reasons.

This is especially important during transitions between carriers.

Plan Mirroring:

A feature where the stop-loss policy matches the terms of the employer’s self-funded health plan.

For example, if the health plan covers 80% of hospitalization costs, the stop-loss policy reimburses based on the same terms.

Contract Features and Administration

MGU (Managing General Underwriter):

A specialized intermediary granted underwriting authority by an insurer. MGUs perform many functions of insurance carriers but do not bear the financial risk of claims.

Underwriting:

The process of assessing risk and determining appropriate premiums.

For stop-loss insurance, this includes analyzing claims history, evaluating demographics, and tailoring coverage options.

Your Stop-Loss Insurance Questions, Answered

Still have questions? Visit our FAQ Page or contact our team to see how these terms apply to your stop-loss needs.