Specific Coverage

1. Incurred and Paid Contracts

Specific contracts are normally initially offered on an incurred and paid basis. In other words only eligible medical expenses that are diagnosed and paid during the policy period are recoverable.

2. Paid Contracts

When the policy is renewed it has the effect of becoming what is known as a paid contract as claims incurred in the prior 12 months (but not prior to when the employer first purchased the coverage), are covered. Imposing this restriction protects the stop-loss insurer from unknown claims that were not advised at the time of underwriting and which are not covered by the new administrator's managed care and large case management programs.? There are however a couple of variations to this rule as follows:

3. Incurred in 15 months and paid in 12 months (15/12) Contracts

Incurred in 15 months and paid in 12 months (15/12) coverage provides cover for medical expenses that were incurred in the three months prior to the new carrier's initial inception date and paid during the first 12 months. This approach is often desirable to groups that are already self-funded and can demonstrate to the new insurer that they are unlikely to have a costly run-out of claims.

4. Incurred in 12 months and paid in 15 months (12/15)

Incurred in 12 months and paid in 15 months (12/15) coverage provides cover for events that are incurred during the contract period and paid by the employer within the contract period or in the three months after termination of the contract. This coverage provides some security for those employers worried about the possibility of not being able to obtain renewal coverage for any reason and being left uninsured.

5. Mutual amendments

All these coverages can of course be amended by mutual agreement but the employer needs to be aware that poor experience and collecting higher than anticipated claims from the stop-loss carrier will result in increased premiums at renewal.