The stop loss insurance market is seeing changes as employers face rising large medical claims and insurers adjust their strategies. Daniel Davey, senior vice president and national director for Stop Loss MGA at Alliant, says the market is evolving but hasn’t yet reached a hard market phase. However, he advises employers to start managing plan expenses carefully to prepare for challenges ahead.
Large medical claims have grown in both number and size over recent years. Stop-loss policies protect employers from these unusually high health costs. While premiums for these policies have increased, the rise has been steady—around an 8% net effective rate hike according to Alliant’s experience, which matches past years. Groups that raised their deductibles generally saw moderate premium drops. But high-cost claims are surging sharply. For instance, Tokio Marine reported a 1,251% jump since 2013 in stop loss claims exceeding $2 million.
Competition in the market is intense, with more insurers offering traditional stop-loss coverage. This has kept many carriers from passing on the full cost of rising claims to customers. Still, for the 2025/2026 cycle, some carriers plan tougher underwriting. Voya Financial expects its stop loss premiums to rise twice as fast as in 2024. Cigna also plans ‘corrective actions’ after heavy claims hurt its earnings late last year.
Davey warns that economic pressures will likely push premiums higher eventually. Employers should get ready for stricter underwriting and rising costs. He suggests proving that health plans are managing high-cost claims well and closely reviewing policy and carrier details to ensure expected coverage.
Employers should also watch how claims are handled. Davey notes that claims administrators and pharmacy benefit managers don’t always follow plan terms exactly. He recommends using detailed analytics to check for errors like duplicate payments or improper charges. Clinical oversight from healthcare professionals can help confirm big claims are necessary, appropriate, and fairly priced.
Since medical bills can be very high, it’s important to choose stop loss carriers with strong financial backing. Davey advises avoiding new, undercapitalized companies and selecting firms rated A- or better by AM Best. Reviewing policy language is key too. The best contracts include plan-mirroring endorsements, making sure claims covered by the health plan aren’t denied by the stop loss policy.
To control costs, adding provisions like rate caps—which limit how much premiums can rise—and “no new lasers,” which block new exclusions on specific individuals, can help. Sharing claims data openly with underwriters can lead to better rates since they get a clearer picture of risks.
Regarding deductibles, setting the stop loss deductible near the highest level the company can handle makes sense today. Claims over $250,000 are more common now, so budgeting for higher claims and insurance at a larger threshold may be wiser.
Finally, working with an experienced broker is crucial. The right professional understands stop-loss policies, has good relationships with carriers, and can present data effectively to get the best terms.
With big medical claims on the rise and insurers tightening terms, employers will need to stay proactive to manage stop loss costs and ensure solid coverage in the coming years.