Course 2: Stop Loss and Marketing in Self-Funding

Vocabulary practice flashcards defining essential terminology, contract provisions, administrative arrangements, and underwriting mechanisms in stop-loss and self-funded health benefit plans.

Stop-Loss Insurance

A form of risk transfer coverage that reimburses a self-funded employer once eligible medical claims exceed a preset specific or aggregate deductible.

Specific Stop-Loss

Stop-loss protection designed to limit an employer's financial exposure for eligible medical expenses on any single covered individual during an agreement period.

Aggregate Stop-Loss

Stop-loss coverage designed to limit an employer's overall financial liability resulting from high claims utilization across the entire covered group during the agreement year.

Managing General Underwriter (MGU)

An entity that stands in for a stop-loss carrier to manage marketing, pricing, underwriting, policy issuance, claims paying, and auditing, often assuming a financial stake in the venture.

Direct Writer

A stop-loss carrier that writes coverage on its own state-filed policies and maintains internal underwriting, policy issuance, and claims-paying authority while retaining most of the risk.

Non-Admitted Carrier

An insurance company (also called a surplus line insurer) not licensed by a state insurance department, but legally permitted to provide coverage in that state under specific circumstances, often requiring deposited collateral.

Net Accounting (Setoffs)

An administrative practice allowing a stop-loss carrier to offset premiums due from a health plan against the reserve held for unpaid covered claims of that plan.

Fronting Arrangement

An insurance setup where a licensed insurance company issues a policy to satisfy regulatory and market requirements, but transfers most or all of the underlying risk to a reinsurer or captive insurer.

Lasering

The stop-loss underwriting practice of assigning a higher specific deductible to an individual participant identified as having a known, ongoing, or catastrophic claim risk to lower the group's overall specific premium.

Conditional Laser

A contingent laser that applies a higher specific deductible only if an individual member undergoes a specified medical event or predicted high-cost treatment, such as an organ transplant or dialysis.

Aggregated Specific

A risk-shift provision that lowers the employer's stop-loss premium costs while guaranteeing maximum costs will not exceed standard rates, offering financial savings if individual claims experience remains favorable.

Specific Advance (Simultaneous Reimbursement)

A mechanism that shifts specific claim payment from reimbursement to indemnity, allowing the administrator to receive stop-loss funds before releasing payment for claims exceeding the specific deductible.

Monthly Aggregate Accommodation

An optional stop-loss feature that acts as a monthly line of credit, reimbursing an employer when year-to-date claims exceed the cumulative aggregate attachment point before the end of the policy year.

Aggregate Run-Out Option

A contract feature providing stop-loss coverage for eligible claims incurred prior to policy termination, provided they are paid within a specified period (typically $60$ to $90$ days) following termination.

Plan Mirroring

The practice of aligning the language, definitions, and exclusions of a stop-loss contract with the employer's underlying self-funded plan document to prevent gaps in coverage.

Reference-Based Pricing (RBP)

A plan model that eschews contracted provider networks in favor of open access, calculating allowable reimbursement amounts based on an established benchmark, such as a percentage above Medicare.

Shock Claims

High-dollar medical claims (generally defined as claims exceeding $50\%$ of the specific deductible or $\$20{,}000$) that require early disclosure and notification to the stop-loss underwriter.

Drop-Down Liability

A legal concept asserting that an excess or stop-loss insurer should assume primary responsibility and cover claims from dollar one in the event of an employer's insolvency or bankruptcy.

Rhode Island Trusts

Nonqualified multiple employer trusts established in states like Rhode Island, originally designed by life insurers to circumvent restrictive state group insurance statutes and contingency reserve mandates.

Insurance Broker (in Self-Funding)

An individual or organization that negotiates, places, or affects stop-loss policies on behalf of a client without being an appointed agent of any particular stop-loss carrier.

Insurance Consultant

A licensed entity or individual that offers advice, counsel, or service regarding stop-loss benefits and plan designs for a fee, legally bound to serve the interests of the client with loyalty and objectivity.

Actively-at-Work Provision

A stop-loss requirement requiring that an employee be on the job performing all regular full-time duties on the plan's effective date in order for coverage to attach.

Disclosure Statement

A required underwriting document executed prior to risk attachment detailing known potential large-loss claimants, hospitalized dependents, disabled participants, and individuals with trigger diagnoses.

Incurred and Paid Basis ($12/12$)

A stop-loss contract basis covering eligible claims that are both incurred and paid during the same $12$-month agreement period.

State Guaranty Association

A statutory entity established to protect policyholders of insolvent licensed insurers by assessing surviving member insurers to pay claims, typically excluding reinsurance contracts.