EMPLOYER STOP LOSS GROWTH AND PERFORMANCE:

Premium and Claim Trends

Rapid premium growth since 2014 has been primarily driven by adoption of the Affordable Care Act, which fueled an increase in self-funding and high-dollar claims. A decade ago, a $1M claim garnered significant attention from
payers and stop loss carriers. Today, $5M is the new $2M and, unfortunately, $1M claims are very common.

The NAIC released its 2024 Accident and Health Policy Experience Report in September 2025, showing the stop loss market has grown to $40B, up from $35B in 2023. The top 10 carriers remain
largely the same as those a decade ago, but overall premiums have increased more than 200% during that time.

NAIC Stop Loss Market Share

BCBS Plans

Non-Blue Health Plans

Third-Party Carriers

NAIC Stop Loss
Loss Ratios

BCBS Plans

Non-Blue Health Plans

Third-Party Carriers

Acquisitions

In 2018-2019, Western & Southern acquired Gerber Life (a Nestle company), in a deal worth $1.55B (3). Gerber Life is a well-known fronting carrier for managing general underwriters (MGUs). Program managers bring together MGUs, fronting carriers, and reinsurers to approach the market with a diversified skill set and an alignment of goals. NAIC data shows Gerber Life premiums have remained steady from 2018-2024, with loss ratios performing in the low 70s for most of that period.

In January 2025, Nationwide announced its intent to acquire Allstate’s employer stop loss business for $1.25B (4). The following month, in February, Elevance announced their intent to acquire Granular, a stop loss company stood up by Google subsidiary, Verily (5). Granular came to market in 2019 with a differentiated stop loss product and underwriting model, and quickly built a block of business through the traditional distribution path of brokers and consultants. By 2024, NAIC data shows Granular with over $500M in premium, and loss ratios in the 90s, including a 140% loss ratio in 2021.

New Entrants & Exits

In recent years, two carriers with a focus on group life and disability coverages entered and then exited the market. In 2013, Guardian Life introduced its stop loss coverage (6), and then announced an exit in 2017 (7). Unum followed a similar trajectory, entering the market in 2018 (8), and exiting in 2024 (9).

Other companies have made shifts to enter the growing stop loss market. In late 2024, Prudential (a life/disability carrier) launched its stop loss product (10). In 2023, Old Republic (a P&C carrier/reinsurer) launched a stop loss product through their accident and health subsidiary (11).

Alternative Funding Solutions

New entrants also include alternative funding solutions competing for market share. Employers with 25-500 lives are increasingly seeking alternatives to traditional fully insured products, driven by rising costs, demand for data transparency, and the promise of surplus returns. Small group captives are bringing forward a stack of vendor solutions (TPA, PBM, cost containment and stop loss carrier), that make it easier for these smaller employers to move to self-funding. These entities are certainly a force to reckon with – Pareto Health distributes over $1B of stop loss coverage (12).

How it works:

• Employers utilize self-insured solutions (TPA, PBM, network) and maintain their own stop loss policies
• As a group of employers, they share an additional layer of risk (i.e., from their deductible, typically $50K, up to a cap, such as $300K)
• The “cap” becomes a reinsurance threshold for the captive layer
• The carrier acts as a “front,” ceding premium to the captive and providing underwriting and claims services
• Employers are incentivized to control costs, benefiting from surplus in the captive layer and aiming to keep future stop loss increases low

While some stop loss carriers work with aggregators, others have developed their own small group captive offering and work directly with brokers in writing/placing this product.

Small group captives pose a threat to fully insured carriers and down-market stop loss carriers as they provide a robust solution for small groups that allows for a safer way to self-insure and reduces the decision points needed for the plan sponsor. With many aggregators backed by private equity, the small group captive model is poised for growth.

Product Portfolio

Talent and Tools

Allocated Capital

Technology and Operations

Distribution Strategy

Product and Solution Portfolio

Successful stop loss carriers have a 50-state license and ability to distribute nationally, allowing them to gain scale with premium growth. It also allows for writing heterogeneous risk with exposure from different geographies, bringing different payers, utilization patterns, and cost of care. But – having a 50-state license is not enough.

We’ve seen successful stop loss carriers expand their products in recent years to include employer- and broker-friendly features, including NNL/RCs, experience-rated refunds, lower aggregate corridors (115%-120%), and monthly, or sometimes weekly, accommodation (capping short-term volatility). Many of these features are requirements for brokers, but as mentioned above, can place pressure on profitability.

Several carriers are also expanding their solution set by offering differentiated products. Most notably, carriers offering level-funded and/or small group captive solutions, as highlighted in the previous section, have grown in recent years due to the expansion of down-market self-funding. Other solutions new to the market include specialty products for gene therapy, ranging from filed stop loss products to performance guarantees. In those solutions, employers are paying a fixed amount to outsource any gene therapy claims that could wreak havoc for a smaller self-insured employer.

Talent and Tools

One of the most critical success factors for high-performing stop loss carriers is having dedicated talent focused specifically on stop loss. It starts with having product leaders who understand the needs of employers who purchase stop loss coverage, and having a dedicated team of stop loss underwriters and actuaries who specialize in high-dollar risk modeling and pricing. Stop loss pricing differs greatly from first-dollar fully insured pricing, and having actuaries who understand the impact of network discounts and utilization of high-dollar medical procedures and specialty drugs can lead to better pricing and profitability.

Along with underwriters and actuaries, clinicians play a key role in not only assessing medical risk but also applying that risk to the structure of the stop loss policy, helping underwriters make more informed decisions for upcoming coverage periods. For example, stop loss policies can vary in coverage periods, from incurred policies to paid policies. The role of a stop loss clinician is not only to assess medical risk of the potential claimant, but to help the underwriter determine if that individual poses risk to the upcoming stop loss policy. While a cancer claimant may present itself in the underwriting data, that individual’s claims could be in the run-out stage after having had a major procedure. With the high-dollar event already incurred and paid, the impact to a new incurred stop loss policy may be limited.

Along with talent, there is a need to understand tools that make stop loss carriers successful. The starting point is having an age/gender/demographic pricing manual. Many large stop loss carriers develop their own pricing manuals based on their historical results. Smaller stop loss carriers will utilize commercial pricing tools developed by actuarial firms.

Within the pricing model are several component factors, none of which are more important than the network efficiency factors (i.e., discounts). Payer/provider reimbursements for high-dollar services can look very different than first-dollar discounts, and understanding the impact of this issue at various deductibles can help a stop loss carrier price their coverage in a more profitable manner. Having access to provider reimbursement data at various thresholds across several networks can make stop loss pricing easier. Some actuarial firms do not include network discount factors, which are critical to pricing.

Allocated Capital

Stop loss is a capital-intensive product. Carriers often need to set aside $1 of capital for every $1 of stop loss premium written. More catastrophic coverages, such as P&C lines, can be even more capital intensive. On the other hand, most health plans are more familiar with less intensive lines such as first-dollar medical and Medicare Advantage plans. Stop loss is a unique product in that it is an accident/health line, though its volatility and intensity makes it look more like a P&C line.

As carriers grow their stop loss premium, they look to get more capital efficient as risk-based capital ratios decrease. As a result, capital-motivated reinsurance solutions are gaining popularity in recent years, as well as the use of captives. Both solutions involve a quota-share reinsurance risk transfer from the writing carrier to another entity. Further, both solutions allow the writing carrier to maintain underwriting gains and have the backstop of a commercial reinsurer. What differs in the two solutions are control, ability to exit coverage, and the costs of each solution.

A capital-motivated reinsurance solution typically costs between 60 and 80 basis points (usually driven by premium volume and risk/stability of covered lines). Use of captives is typically more of a fixed-fee cost structure but could also require carriers to bring capital as collateral.

Technology and Operations

Historically, stop loss has been a product and industry slow to adopt technology, but recent years have seen meaningful advancements. Many successful stop loss carriers are processing over 10,000 RFPs per year and moving those opportunities from intake, to underwriting, to clinical. Then, if it sells, moving through sold case processing, to policy issuance and full administration of the policy (premium and claims). Many stop loss carriers utilize an administrative platform to manage the workflow and connect to internal financial and regulatory controls, or have a home-grown solution.

RFPs flow into carriers/MGUs from brokers and consultants. Increasingly, brokers are utilizing RFP management and procurement solutions, which allow brokers to setup an RFP and “release” the request to various markets in a consistent/efficient manner that protects sensitive member data. Having connectivity to these platforms through APIs is becoming a major pain point for carriers as they require IT and development time. In today’s world, most carriers (and any other company for that matter) have a lengthy list of IT and data projects, making it difficult to add these RFP platforms in the near-term.

New technology and predictive underwriting tools are also growing in popularity. Tools that allow stop loss carriers to make decisions on writing risk are often used for go/no-go decisions where access to traditional large claimant data might not be available. However, incorporating these tools into the workflow process presents challenges for stop loss carriers, as well as first-dollar payers.

Beyond the latest technology advances, the core business of issuing policies, collecting premiums, and paying claims is a place where stop loss carriers must maintain above-standard customer service. With claim volumes up for all stop loss carriers, the timeliness and accuracy of payments are a place where stop loss carriers do not win points with customers, but can certainly be reasons for negative feedback.

Distribution Strategy

Distribution strategy may be the most critical factor in the success of a stop loss carrier. Even with a strong product portfolio, enough capital, smart use of technology, and the best talent and tools, a carrier will fail without a clear and effective distribution strategy. Most stop loss policies are procured via benefits brokers or wholesalers. In a market where there are over 100 stop loss carriers, it is not feasible for brokers to quote every possible choice. Most brokers will seek bids from four to eight preferred partners, typically referred to as a panel or “center of excellence”. Further, many stop loss carriers have insourced the stop loss procurement process to a group of internal experts. Large and mid-market brokers/consultants may handle all stop loss activity within a centralized team. To be a preferred carrier to these brokers, carriers must meet certain criteria:

These preferred carriers agree upfront to terms and conditions that deliver value to employers, simplifying the quoting process and enhancing broker efficiency and scale.

Smaller brokers and TPAs typically do not have the expertise to manage a stop loss product in this way. As such, it is common for them to outsource to a wholesaler. Larger wholesalers are able to scale pricing and product features similar to mid- and large brokers. Wholesalers usually go to many more markets (10-15) in order to get the best possible price for their clients.

Being contracted with national producers and wholesalers is both an advantage and disadvantage. These firms are driving significant value for clients (i.e., NNL/RCs, experience refunds), however, the inability to fully adjust for rates at renewal is a consistent theme of large stop loss carriers regarding poor loss ratios. That said, brokers drive the placement and procurement of stop loss, and in order to see adequate levels of opportunity, it is imperative to contract within the terms and provisions they request.

The brokerage space has also seen significant consolidation in recent years. Recent acquisitions seen in the brokerage space include:

• Brown & Brown acquiring Ascension Risk Management – parent of Risk Strategies and One80 (June 2025) (14)
• Gallagher acquiring Assured Partners (August 2025) (15), Woodruff Sawyer (April 2023) (16), and Buck Consultants (April 2023) (17)
• Aon acquiring NFP (December 2024) (18)
• Marsh & McLennan acquiring Acumen Solutions Group (January 2025) (19), McGriff (November 2024) (20), and The Horton Group (August 2024) (21).

As the acquisitions get fully integrated using a centralized procurement system, the stop loss placement process is certainly one where synergies could emerge.