Stop-loss insurance is the name given to the insurance that self-funded employer health plans buy when they use insurance to protect against individual large claims or a total amount of claims in a year that are well above projections. Because of unexpectedly high expenses in the last couple of years, stop-loss price increases were significant this year. Amwins is one of the large stop-loss carriers and has issued a report on its experience which may give a sense of what 2026 and 2027 will be like. The report gives some of the basic background on health spending, its increase relative to economic growth and its price rises at a higher rate than general inflation; the increased cost of hospital services in particular and the growth of expensive drug use and pricing.
The report notes expectations of medical cost trend for 2026 and 2027 as high as 8% or 9%, with higher premium increases for the fully-insured market. A number of federal and state initiatives relative to medical insurance are discussed, including PBM legislation and increased scrutiny of fiduciary responsibilities related to self-funded plans. Most of these initiatives may actually raise costs. In regard to the stop-loss experience, most self-funded plans are seeing far more high dollar claims, with many over $250,000 and an increasing number over $1 million. This means the stop-loss insurers are making less money or even losing money. A number of these insurers have actually left the market, which facilitates bigger premium increases by those that remain.
Employers’ responses to these trends are manifold, including taking more of the risk themselves, attempting to find cost containment solutions that actually work, using a narrower network of reasonable cost providers, avoiding use of hospital outpatient centers and pooling some of their risk with other plans. Cell and gene therapies, specialty drugs, and weight loss drugs are singled out as opportunities for savings. Total stop-loss premiums are rising at double-digit rates, driven partly by more use of self-funding, but largely by increased claims costs. The overall picture is of a market with substantial challenges, likely to contribute to higher employer health costs and not yet doing a lot to reduce those costs. (Amwins Report)
