Experience Refund

Stop loss premium is typically fixed and non-refundable. If claims are low and the carrier pays little or nothing in reimbursements, the carrier keeps the premium.

An Experience Refund endorsement modifies this by stating; if claims fall below a defined threshold, the employer may receive a refund of a portion of the stop loss premium.
 

It introduces a shared-risk, shared-reward component.

While structures vary, most experience refund endorsements follow this formula:

Step 1: Determine Earned Premium
Total stop loss premium paid during the policy year (specific and/or aggregate, depending on wording).

Step 2: Subtract Claims Paid
Total stop loss reimbursements issued by the carrier.

Step 3: Apply a Carrier Retention
The carrier keeps a predefined percentage (e.g., 20–30%) as risk charge and administrative margin.

Step 4: Refund Remaining Surplus
If a surplus remains after retention, part of it is refunded to the employer.

**Please read your policy's endorsement for an accurate calculation**

Assume:

• Total stop loss premium: $300,000
• Stop loss reimbursements paid: $50,000
• Net surplus: $250,000

Carrier retention: 25% of premium ($75,000)

Available for refund:
$300,000 – $50,000 – $75,000 = $175,000

Depending on contract terms, the employer may receive some or all of that $175,000. If claims are high and exceed premium, there is no refund — but the employer is still protected by the stop loss coverage.

Experience refunds are typically calculated:

• After the contract run-out period ends (e.g., after 12/15 or 12/18 completion)
• Once all eligible claims are finalized
• Often several months after the policy year closes

This ensures the calculation reflects final claim activity.