Straight talk about stop loss premiums

The stop loss landscape is evolving, and 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.

As the frequency and severity of very large medical claims have surged over the past few years, stop loss market experts expected a corresponding rise in the premiums of stop loss policies, which shield employers from unusually high health plan expenses.

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. 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. Tokio Marine HCC has reported a 1,251% increase in the frequency of stop loss claims exceeding $2 million since 2013.

Tokio Marine HCC – A&H Group (June 2025). 2025 Annual Market Report, page 5. http://www.tmhcc.com/en-us/-/media/project/tokio-marine/tmhcc-us/documents/2025-annual-report.pdf

So far, carriers haven’t had the ability to pass along the bulk of rising claims costs to customers because the market has remained fiercely competitive, with more carriers, notably Prudential and RGA, beginning to offer traditional stop loss coverage.

But 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.

Sooner rather than later, economic reality is going to catch up with the majority of insurance companies, so employers should prepare now for higher stop loss premiums as a result of carriers exercising more underwriting discipline.

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. The following steps will help you to achieve both of these goals:

Thorough oversight of your claims processing

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:

• Payment integrity reviews — analyze claims data and identify inappropriate plan spend, such as duplicate claim payments and unbundling of inpatient charges.
• Clinical oversight — an examination by healthcare professionals (often RNs) of large or outlier claims to ensure treatments are medically appropriate, necessary, and costs are reasonable for the services provided.

Use a carrier with a strong balance sheet

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.

Avoid “Swiss cheese” coverage

Scrutinize the policy terms for any vague language that could allow a carrier to wiggle out of 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.

Keep premiums stable

Adding the following two provisions to your policy will help to manage your costs in future years:

• Rate caps, which limit the amount that premiums can increase at renewal.
• No new lasers, which prohibit a carrier from adding exclusions (called lasers) that limit coverage for certain individuals at renewal.

Leverage your data

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.

Buy only what you need

Double-check that you’ve set your stop loss deductible towards the higher end of what your company can absorb. 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.

Use an advisor with stop loss expertise

With underwriters charged with trying to raise premiums substantially, it’s more important than ever to talk to a broker who understands the nuances of the stop loss market. 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.

How Alliant can help

We offer clients a comprehensive approach to managing claims expenses, including stop loss coverage. Our analytics platform and clinical oversight professionals will help you make sure that you are paying claims in strict accordance with your plan terms. And we work with a carefully vetted panel of underwriters to interpret your data so we can get the best terms for your situation. Learn more about Alliant's suite of funding solutions.