What should I look for in a stop loss contract?

If you self-fund, your stop loss contract is the most important insurance policy you own, and most employers have never read it. Two contracts with the same premium can behave completely differently the year someone gets cancer.

Here's what actually matters:

Specific and aggregate. Specific protects you from one person's claims going past a set amount. If your specific deductible is $75,000 and someone runs up $400,000, you pay the first $75,000. Aggregate protects you from a bad year overall, usually attaching at 120 to 125 percent of expected claims.
Contract basis. This is the one that catches people. A 12/12 contract only covers claims incurred and paid in the same 12 months, so a claim incurred in month 11 and paid in month 13 falls through. 12/15 or 12/18 covers run-out. 24/12 is common at renewal to cover run-in.
Lasers. A laser gives one known high-cost person a higher deductible than everyone else. If your deductible is $75,000 and an employee on dialysis is lasered at $300,000, your plan absorbs that first $300,000. Lasers are not always bad, but you need to see the math, and you need to know they are coming before your renewal shows up.
No new laser and rate caps. These riders protect you when someone gets diagnosed mid-year. They cost money. In my experience they are often worth it.
Terminal liability. If you ever leave self-funding, you still owe claims incurred before you left.

The question you need to answer is simple: if we leave self-funding or switch stop loss carriers, which claims fall through the cracks?

Questions to ask

What is our contract basis, and what happens to run-out claims if we leave?
Do we have a no new laser rider and a rate cap? What did they cost?
Were any lasers added or proposed, and what was the math on accepting vs buying them out?
Is there any commission built into our stop loss premium?

How do underwriters actually price our renewal?

Your renewal is a number the carrier decides, not one it simply calculates. The underwriter projects your claims, adds trend, blends in a manual rate based on credibility, applies pooling charges for large claims, then adds retention for admin, taxes, commissions, risk, and profit. Every one of those inputs has a range, which is why two carriers can look at the same data and come back 15 percent apart.

When should we start working on our health plan renewal?

Five months or more before the effective date. Requests for quotes typically go out three to four months before renewal for fully insured groups and four to five months out for self-funded and captive groups, because stop loss quotes and lasers depend on current large claim detail. Most renewals fail because they start 60 days out.

Why did our renewal go up when our claims were good?

If you are fully insured, very little of your renewal is based on your own claims. It is driven by a large, generally unhealthy risk pool, and when your claims come in under what the carrier priced, the carrier keeps the difference. Changing how the plan is funded, even with the same carrier and plan, is often what fixes it.