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What is stop-loss insurance?
Stop-loss insurance protects an employer with a self-funded health plan against claims larger than expected. It does not cover employees — it reimburses the plan. Specific stop-loss caps exposure on any one person; aggregate stop-loss caps total claims across the whole plan for the year.
The premium is the least interesting part of a stop-loss contract. The contract basis, the lasers and the run-in and run-out provisions decide whether it responds when you need it.
Key takeaways
- It insures the plan, not the employee. Stop-loss reimburses the employer or the plan; employees have no claim under it.
- Specific caps one claimant. Claims on any single individual above the specific deductible are reimbursed.
- Aggregate caps the whole plan. Total claims above an attachment point, usually set as a percentage of expected claims.
- Contract basis decides timing. Which claims count depends on when they were incurred and when they were paid.
- A laser removes protection. It sets a higher deductible for a specific known claimant, and it is negotiable.
What does stop-loss insurance cover?
Stop-loss is insurance bought by the employer, protecting the plan. It reimburses claims the plan has already paid above an agreed threshold. Employees are not insureds under it and have no claim against it — their benefits come from the plan itself, whether or not stop-loss responds.
What is specific stop-loss?
Specific stop-loss, sometimes called individual stop-loss, caps exposure on any one covered person. Once claims for that individual exceed the specific deductible within the policy year, further eligible claims for that person are reimbursed. It is the protection against a single catastrophic case.
What is aggregate stop-loss?
Aggregate stop-loss caps total claims across the whole plan. It responds when the plan’s total eligible claims exceed an attachment point, usually expressed as a percentage of expected claims. It is the protection against many moderate claims rather than one large one, and it typically settles at or after year end.
Most self-funded programs carry both. They protect against different failure modes and neither substitutes for the other.
| Specific stop-loss | Aggregate stop-loss | |
|---|---|---|
| What it protects against | One unusually large claimant | Many moderate claims adding up |
| Trigger | Claims on a single individual exceed the specific deductible | Total plan claims exceed the aggregate attachment point |
| Typically set as | A dollar deductible per covered person per year | A percentage of expected claims, commonly above 100% |
| Who is reimbursed | The plan or the employer | The plan or the employer |
| When it usually pays | During the year, as the claimant exceeds the deductible | At or after year end, once totals are known |
| Affected by lasers | Yes — a laser raises the deductible for a named claimant | Indirectly, through the expected claims calculation |
| Most common gap | A laser applied at renewal on a known claimant | Attachment point set on optimistic expected claims |
Scroll the table horizontally on narrow screens.
Where stop-loss sits in the program
- Confirm the contract basis and what it means for claims incurred near the policy boundary.
- Check the specific deductible against the plan’s claims history, not against a benchmark.
- Check the aggregate attachment point and how expected claims were derived.
- Identify any lasers and negotiate them — a laser is a decision, not a fact.
- Confirm run-in and run-out provisions before you need them.
- Confirm disclosure obligations at renewal, so a late-disclosed claimant does not become a coverage dispute.
Authoritative references
Explanatory guidance
- Health Plans and Benefits — U.S. Department of LaborSupports: ERISA framework applicable to self-funded employer group health plans that stop-loss supportsVerified 26 July 2026
- Texas Department of Insurance — State of TexasSupports: Texas insurance regulation background for employers evaluating stop-loss placementVerified 26 July 2026
Published 26 July 2026. Last reviewed 26 July 2026. Next review every 12 months. 4J Insurance is an independent commercial insurance brokerage, powered by PGI, based in Frisco, Texas. This page explains stop-loss contract mechanics in general terms. It is not legal, tax or actuarial advice and is not a representation of terms available on any account. Stop-loss availability and terms are subject to underwriting.
How stop-loss actually works
Contract basis: the term that decides whether a claim counts
A stop-loss contract specifies which claims fall inside the policy year, using two dates: when the claim was incurred and when it was paid. Common structures pair a twelve-month incurred window with a twelve-, fifteen- or twenty-four-month paid window. The mismatch matters at the boundaries. A claim incurred in December and paid in March may or may not be covered depending entirely on this term, and it is the single most common source of an unexpected uncovered claim.
Run-in and run-out
Run-in covers claims incurred before the policy started but paid during it — relevant when changing stop-loss carriers. Run-out covers claims incurred during the policy year but paid after it ends — relevant when terminating a self-funded arrangement. An employer that leaves a self-funded plan without run-out protection can be presented with claims for a plan it no longer operates.
Lasers
A laser is a higher specific deductible applied to a named individual whose condition the carrier already knows about. Instead of a uniform deductible across the group, that person carries a materially higher one, and the employer retains the difference.
Lasers are a negotiating position, not a fact handed down. They can often be traded against rate, capped by a no-new-laser provision, or limited by a renewal rate cap. An employer presented with a laser at renewal and no alternative is usually being asked to accept the carrier’s first position.
What underwriters look at
Census and demographics; two to three years of claims history where available; large claimant detail and ongoing conditions; the plan document and any benefit changes; the third-party administrator and network; industry and location; prior stop-loss terms and whether lasers were applied; and disclosure of known pending claimants. Incomplete disclosure at underwriting is what turns into a coverage dispute later.
What to check before binding
- The contract basis, stated explicitly, and what happens to claims at the year boundary
- Whether run-in or run-out is included, and at what cost
- Every laser, and whether a no-new-laser or rate-cap provision is available
- How expected claims were derived for the aggregate attachment point
- Whether the aggregate is paid monthly or only at year end
- Disclosure obligations and the consequence of a late-disclosed claimant
- Whether the specific deductible has moved and why
Not every term or provision is available on every account. Stop-loss availability, deductibles, attachment points and contract terms are subject to underwriting.
Related resources
Continue learning
- Fully insured vs level-funded vs self-funded
- Lowering health plan costs
- Why group health costs and coverage clash
- Group health insurance
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Health plan funding resources — the rest of the funding cluster
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Request a stop-loss review — we read the contract basis, lasers and run-out terms, not just the rate
Stop-loss FAQ
Does stop-loss insurance cover employees?
No. Stop-loss is bought by the employer and reimburses the plan or the employer for claims paid above an agreed threshold. Employees are not insureds under it and have no claim against it. Their benefits come from the plan document regardless of whether stop-loss responds.
What is the difference between specific and aggregate stop-loss?
Specific stop-loss caps exposure on any one covered individual once their claims exceed a specific deductible. Aggregate stop-loss caps total plan claims once they exceed an attachment point, usually set as a percentage of expected claims. They protect against different failure modes — one catastrophic case versus many moderate claims — and most self-funded programs carry both.
What is a stop-loss laser?
A laser is a higher specific deductible applied to a named individual whose condition the carrier already knows about, leaving the employer to retain more of that person’s claims. Lasers are negotiable. They can often be traded against rate or limited by a no-new-laser provision or a renewal rate cap.
What does contract basis mean?
It defines which claims fall within the policy year, using when a claim was incurred and when it was paid. A mismatch at the year boundary is the most common cause of an unexpectedly uncovered claim, so the basis should be stated explicitly and understood before binding rather than discovered afterwards.
What is run-out coverage and when do I need it?
Run-out covers claims incurred during the policy year but paid after it ends. It matters most when terminating a self-funded arrangement, because claims continue to be presented after the plan stops operating. Without it an employer can be paying claims for a plan it no longer has.
Do level-funded plans include stop-loss?
Yes. Level-funded arrangements are self-funded arrangements with stop-loss built in, and the terms are set by the carrier rather than separately negotiated. That simplicity is part of the appeal, but it also means the contract terms are less open to negotiation than in a fully self-funded program.
The rate is the easiest term to compare and the least important
Contract basis, lasers and run-out decide whether the policy responds when a claim actually lands.