A “run-in period” provides coverage for medical claims incurred prior to the start of a policy year.
A “run-in period” prevents a gap in coverage when an employer switches from a fully-insured health plan to a self-funded health plan or changes stop-loss carriers.
In a self-funded health plan, an employer assumes responsibility for paying the medical expenses of the plan’s participants. Often, an employer will purchase stop-loss insurance to protect itself against larger than expected claims. Stop-loss insurance reimburses the employer in the event that a plan participant incurs costs in excess of a certain amount or in the event that all of the plan participants in the aggregate incur costs in excess of a larger amount.
The standard stop-loss insurance contract has a coverage period of twelve months; for example, the calendar year. This means that claims are only covered if they are incurred and paid during the 12-month contract period. However, billing often lags care. So, what happens if a plan participant goes to the doctor in one plan year, but the doctor does not bill until the following plan year?
If the employer has a stop-loss policy with a “run-in period”, the cost of medical care provided in one policy year, but not billed until the next policy year, would be covered. Without a “run-in period”, costs that were incurred during a plan year, but not paid during that plan year, would not be covered, and the employer would have to pay the entire cost.
A typical “run-in period” is three months. This means that costs incurred during the 3-month period prior to the start of the policy year will be covered if they are not billed and paid until after the start of the policy year. A policy with a “run-in period” of three months is referred to as a “15/12 policy”.