Self-funded employers take on claims risk—and stop loss insurance is the safety net. But how do you know if your stop loss terms are competitive? Are you over-insured and paying too much? Under-insured and exposed?
This guide covers how to benchmark stop loss coverage, what metrics matter, and how to evaluate your position against peers.
What is Stop Loss Insurance?
Stop loss insurance protects self-funded employers from catastrophic claims. There are two types:
Specific Stop Loss
Protects against high claims from any single individual. Once an employee's claims exceed the "specific deductible," the stop loss carrier pays the excess.
Aggregate Stop Loss
Protects against higher-than-expected total claims for the entire group. If total claims exceed the "aggregate attachment point," stop loss pays the excess.
Why Both Matter
Specific protects against individual catastrophic claims (cancer, transplants, premature babies). Aggregate protects against "death by a thousand cuts"—lots of moderate claims that add up. Most self-funded employers carry both.
Key Metrics to Benchmark
When benchmarking stop loss, focus on these key metrics:
Specific Deductible
The per-person threshold before stop loss kicks in. Lower deductibles mean more protection but higher premiums. The "right" level depends on your risk tolerance and group size.
Rule of thumb: Larger groups can handle higher deductibles because they have more premium dollars to absorb volatility.
Specific Stop Loss Rates
The annual cost of specific stop loss coverage, typically quoted separately for single and family tiers. Rates vary based on deductible level, group demographics, claims history, and industry.
What We Track
- Specific Single Rate: Annual cost for employee-only coverage
- Specific Family Rate: Annual cost for family coverage
Caution: Rates vary widely. A "good" rate depends on your specific situation—don't benchmark rate without also benchmarking deductible level.
Aggregate Rate
The annual cost of aggregate stop loss coverage per employee. Aggregate stop loss protects against total claims exceeding expected levels across your entire population.
Number of Lasers
A laser is a higher specific deductible applied to a known high-cost individual. If you have an employee with ongoing expensive treatment, the carrier may "laser" them at $300K while everyone else is at $150K.
What to benchmark: How many lasers do peers have? Too many lasers may indicate it's time to shop carriers or that your specific deductible is set too low for your risk profile.
Additional Metrics We're Adding
We're expanding our stop loss benchmarking to include policy provisions and contract terms that matter:
Aggregate Corridor
The percentage above expected claims where aggregate coverage kicks in (e.g., 125%, 130%). Lower percentages mean earlier protection but higher cost.
Aggregating Specific Deductible
The deductible amount used when calculating claims against the aggregate attachment point.
No New Laser Provision
Whether the carrier guarantees not to add new lasers at renewal. A valuable protection against surprise exclusions.
Renewal Rate Cap
Whether there's a limit on how much rates can increase at renewal. Provides budget predictability.
Contract Basis
Whether the policy is on an incurred or paid basis. Affects how claims are counted and when coverage applies.
Captive Participation
Whether the employer participates in a captive arrangement, which can provide cost savings and more control over coverage.
Factors That Affect Your Stop Loss
Stop loss isn't one-size-fits-all. These factors influence your terms and rates:
Group Size
Larger groups get better rates and can handle higher deductibles. A 1,000-life group has more predictable claims than a 100-life group, so carriers price accordingly. Benchmark against similar-sized employers.
Industry
Some industries have higher claims risk. Manufacturing with physical labor risks, healthcare with older/sicker populations, or tech with younger/healthier workforces all price differently.
Demographics
Age and gender mix matter. Older workforces have higher expected claims. Female-heavy workforces have maternity exposure. Carriers underwrite based on your specific population.
Claims History
Past claims predict future claims. If you've had large claimants, expect carriers to price that in—or exclude/laser those individuals. Clean claims history gets better rates.
Plan Design
Richer underlying medical plans mean higher expected claims and higher stop loss costs. A plan with $500 deductible will have different stop loss pricing than one with $3,000 deductible.
How to Benchmark Your Stop Loss
Stop loss benchmarking requires comparing apples to apples. Here's how:
Gather Your Current Terms
Document your current stop loss arrangement:
- □Specific deductible amount
- □Specific rates (single and family)
- □Aggregate rate
- □Number of lasers and their amounts
- □Aggregate corridor percentage
- □Contract provisions (rate cap, no new laser)
Define Your Peer Group
Stop loss benchmarking is most meaningful when comparing to similar employers:
- Similar group size: 100-life groups shouldn't compare to 1,000-life groups
- Similar industry: Risk profiles vary significantly
Evaluate Deductible Level
Is your specific deductible appropriate for your size and risk tolerance? Compare to peers:
- Below peers: You may be over-insured. Consider raising deductible to save premium.
- At peers: You're in line with market. Focus on rate competitiveness.
- Above peers: You're taking more risk. Make sure that's intentional and you have reserves.
Common Stop Loss Benchmarking Mistakes
1. Ignoring Contract Provisions
Cheapest isn't always best. A low-rate policy without a rate cap or no-new-laser provision could cost more in the long run.
Do this instead: Benchmark contract provisions alongside rates. Some provisions are worth paying more for.
2. Benchmarking Across Very Different Group Sizes
A 100-life group and a 2,000-life group have fundamentally different risk profiles and stop loss economics. Comparing them directly is misleading.
Do this instead: Filter benchmarks by group size band. Compare 100-250 to 100-250, not to everyone.
3. Focusing Only on Specific, Ignoring Aggregate
Specific gets more attention, but aggregate matters too—especially for smaller groups where total claims volatility is higher.
Do this instead: Benchmark both specific and aggregate terms. Consider total stop loss cost, not just specific coverage.
When to Shop Your Stop Loss
Benchmarking might reveal it's time to go to market. Consider shopping if:
Your Rates Are Above Benchmark
If you're paying significantly more than peers at the same deductible level, competitive quotes may reveal savings.
You Have Multiple Lasers
If your carrier has lasered several individuals, other carriers may offer better terms—especially if those claimants have stabilized or termed.
You've Had a Clean Claims Year
After a year with no large claims, you're more attractive to underwriters. Good time to get competitive quotes.
Your Group Has Grown Significantly
Larger groups get better rates. If you've grown from 150 to 300 employees, your risk profile has improved.
You Haven't Shopped in 3+ Years
The stop loss market is competitive. Even if you're happy, it's worth checking the market periodically to ensure you're not overpaying.
Benchmark Your Stop Loss
See how your stop loss coverage compares to peers. Get detailed benchmarks on specific deductibles, rates, and aggregate terms.