Executive Summary: Attachment Points and Lasers: The Math and the Consequences
LFP-02.04 — The Risk Layer#
The specific attachment point translates the underwriting assessment into the employer’s per-member retention. For groups of 10 to 50 lives, carriers commonly offer thresholds from $25,000 to $75,000. The 2025 Aegis Risk survey reported average premiums of $229.40 PEPM at a $100,000 attachment point declining to $50.98 PEPM at $500,000. The relationship is not linear: the marginal cost of lowering from $50,000 to $25,000 is proportionally larger than lowering from $100,000 to $75,000, because claims between $25,000 and $50,000 occur more frequently and each reduction adds claims to the carrier’s liability. The optimal attachment point minimizes total cost, which requires modeling the group’s specific claims distribution rather than selecting from convention. Most brokers choose based on convention or carrier recommendation rather than explicit cost modeling.
The aggregate attachment point, typically 120% to 125% of expected claims, creates the corridor the employer funds without stop loss protection. On a $500,000 expected claims group with 125% aggregate, the corridor is $125,000. For a 15-person group with $300,000 in expected claims, it is $75,000. The corridor is disclosed in the stop loss quote but its financial significance is rarely translated into operational terms: the employer sees “125% aggregate” without understanding they are responsible for up to $125,000 above expected before aggregate protection begins.
Lasers are the most consequential stop loss contract feature for small groups. A laser is a member-specific attachment point set above the standard threshold, applied to identified high-cost members with known conditions: active cancer treatment, organ transplant candidacy, hemophilia, end-stage renal disease. A group with a $50,000 standard attachment point may receive a laser on a hemophilia member at $400,000, meaning the plan retains the first $400,000 of that member’s claims. For a 20-person group, one lasered member with $200,000 in expected annual claims transforms the plan’s financial profile: stop loss premium may decrease because the carrier excluded the risk, while total employer exposure increases by the full laser amount. The level funded economic advantage can disappear entirely.
Timing compounds the laser’s structural effect. At initial placement, the laser appears in the quote and the employer can evaluate alternatives. At renewal, it arrives typically 60 to 90 days before the policy year ends, during the period when carriers and brokers are processing their full annual renewal books. Alternative coverage for a group with a known high-cost member is difficult to obtain precisely because every carrier in the market sees the same claims history. The laser mechanism is where the structural vulnerability of small group level funded is most visible: the carrier returns risk to the employer at the moment the employer has the least capacity to place it elsewhere.