As medical claims get bigger—and pricier—it’s putting pressure on insurers and premiums alike.
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As medical costs rise, the stop-loss insurance industry is feeling pressure, and it’s passing that on to self-funded employers.
Stop-loss makes it possible for employers without bottomless bank accounts to self-fund their employees’ health coverage. If costs exceed a certain pre-agreed upon cap, the stop-loss carrier will cover the bill. Major stop-loss providers include Cigna Healthcare and Elevance—which also administrate companies’ self-funded plans—as well as third-party carriers like Sun Life and Voya Financial.
About 76% of workers in self-funded plans at companies with 50+ employees have stop-loss insurance, according to independent health policy polling, research, and news nonprofit KFF. The stop-loss market brings in more than $35 billion in annual premiums, according to a 2024 report by global consulting and actuarial firm Milliman.
But just like other forms of insurance, stop-loss—and employers that use it—are struggling amid elevated medical costs. Accounting firm PwC’s Health Research Institute predicts an 8% increase in medical costs in the group market and 7.5% in the individual market in 2025, the highest levels seen in 13 years.
“Large claims are getting larger than ever, and they’re becoming more frequent,” Michael Tesoriero, SVP and health consultant at HR and benefits consulting firm Segal, told Healthcare Brew.
One of the largest stop-loss providers with over 2,800 clients, Sun Life, saw the frequency of $1+ million claims rise 45% from 2019 to 2022, according to a 2023 trends analysis.
Medical costs are up due to quite a few factors, according to a 2024 analysis from KFF. That includes a rapidly aging population as well as new, pricier specialty drugs and an increase in chronic conditions.
Cigna, for instance, saw Q4 earnings below expectations in part because its stop-loss arm encountered higher medical costs than expected, driven by costly specialty drugs and expensive inpatient surgeries for cancer and heart conditions, Brian Evanko, Cigna Group president and COO, said during the insurer’s Q4 2024 call on Jan. 30.
Evanko vowed in the call to take steps including increasing stop-loss premiums. And Cigna did better in Q1 2025, beating analysts’ expectations and earning shareholders $1.3 billion, compared to a net loss of $300 million, the year before.
“We are pleased to see that the early indicators on 2025 stop-loss performance are tracking to expectations,” David Cordani, CEO and chairman of the board, said during the Q1 call on May 2.
Another major stop-loss provider, Voya, is hiking up premiums, too.
Premium increases help insurers, of course, but self-funded employers are still struggling, Tesoriero said. It’s on the entire healthcare system to emphasize preventative care in order to avoid this pricing pressure, he added.
Payers like UnitedHealth Group have said in Q1 2025 earnings calls that steering members toward more preventative care is part of their strategy to cut down on costs.
“You have to contain the cost by making sure the [beneficiary] doesn’t get to the point where they’re so sick that they require all those services,” Tesoriero said.
