The stop loss insurance market is undergoing change as employers contend with rising large medical claims and shifting carrier strategies.
Daniel Davey, senior vice president and national director, Stop Loss MGA at Alliant, describes the current environment as one that is currently evolving.
“While we may not be facing an actual ‘hard market’ just yet, it’s a good idea for employers to proactively manage plan expenses to prepare for any potential challenges ahead,” he says.
Davey observes that as the number and scale of large medical claims have climbed in recent years, stop-loss market experts anticipated a parallel increase in premiums for stop-loss policies, which safeguard employers against unusually high health plan costs.
“It’s true that stop loss premiums have risen, but the increase has been steady. Alliant’s book of business indicates a net effective rate rise of about 8%, similar to prior years,” he says.
“Cohort groups that increased their deductible saw a moderate decrease in their premiums. However, what’s notable is the sharp rise in high-cost claims,” he says, highlighting that Tokio Marine found a 1,251% increase in the frequency of stop loss claims exceeding $2 million since 2013.
Despite these increases, Davey explains that carriers have so far been unable to transfer most of the rising claims costs to customers, as competition in the market remains strong, with more players entering the space with traditional stop-loss coverage.
“For the 2025/2026 cycle, many carriers have promised to get tougher. Voya Financial said its stop loss premiums would increase at twice the rate they did in 2024. And Cigna said it would take ‘corrective actions’ after higher-than-expected stop loss claims impaired its 2024 fourth quarter earnings,” he says.
Davey warns that economic pressures will eventually catch up with most insurers, meaning employers should start preparing for higher stop-loss premiums as carriers adopt stricter underwriting practices.
“To get the best deals, you’ll need to be able to prove that your health plan is effective in managing high-cost claims. Just as important, you’ll want to scrutinize both the carrier and policy terms to ensure that you are getting the protection you expect,” he says.
Davey outlines several steps for employers. “You’d be surprised how often your claims administrator and pharmacy benefit manager don’t strictly follow the terms of your plan. Utilize a comprehensive analytics platform to ensure they do.”
He recommends conducting payment integrity reviews, which involve analyzing claims data to uncover improper spending such as duplicate payments or the unbundling of inpatient charges.
He also suggests applying clinical oversight, where healthcare professionals – often registered nurses – review large or unusual claims to confirm that treatments are medically appropriate, necessary, and reasonably priced for the services provided.
“Given skyrocketing medical bills, you could need your stop loss carrier to cover a $5 million – or even $10 million – claim. So, it’s essential to do a thorough vetting to ensure it has the necessary resources. In general, avoid thinly capitalized newcomers and stick to carriers with AM Best ratings of A- or better,” he says.
Policy terms are another key consideration. Davey advises employers to carefully review contracts for vague wording that might give carriers an opportunity to avoid paying a claim.
“The most reliable contracts have a plan-mirroring endorsement, which requires the stop loss policy to handle any claim that is covered by your plan’s terms,” he says.
To help control expenses, Davey suggests adding two provisions to the policy: rate caps, which set limits on how much premiums can rise at renewal, and no new lasers, which prevent carriers from introducing new exclusions that restrict coverage for specific individuals during renewal.
“Be ready and willing to share your claims data with potential underwriters. The more they understand about your members, your process, and your past claim expenses, the sharper their pencil can be when setting rates,” he says.
On deductible levels, Davey advises employers to confirm that their stop-loss deductible is set near the upper limit of what the company can reasonably handle.
“In the past, protection against claims of $250,000 may have been a prudent choice, but now, unfortunately, such claims are so routine that it may make more sense to budget for them and secure insurance at a higher threshold,” he says.
Davey recommends working with a broker who understands the complexities of the stop-loss market, especially as underwriters push for significant premium increases.
“The right skilled professional should have relationships with carriers, experience with policy terms, and tools to present your claims data in the best possible light,” he says.
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