The Hardening Stop Loss Market

“While it’s common to see 20%+ increases in reinsurance this year, both in the last renewal cycle and this one partly driven by leveraged trend, there appear to be fewer new entrants looking to scoop up that business at a loss. So, we have repeatedly found ourselves in situations requiring 30%, 50%, and in some rare cases, even larger increases. Also concerning is the fact that many carriers are curtailing the offer of “no new lasers” contracts.”

The Hardening Stop Loss Market

MyHealthGuide Source: Adam Okun, Co-President, EPIC New York, Employee Benefits, 11/19/2020, EPIC Brokers

While the year 2020 has softened the medical and dental insurance markets, with COVID-19 suppressing claim costs and continuing to place downward pressure on the entire healthcare economy, stop loss has been a very different story. Over the last 12 to 18 months, the reinsurance market continues to harden, and there seems to be a wide variety of reasons, none of which appear to be slowing down.
As this dramatic movement towards self-funding took hold over the last couple of decades (hastened further by some of the features of the Affordable Care Act) a great number of large life, disability, and reinsurance companies jumped into the stop loss market – in addition to the medical insurers – to write this new risk.

And for several years, there seemed to constantly be a new entrant that was willing to buy business with rates 10-20% below the market to build their book of business.

The challenge facing many reinsurers now?

It’s the combination of a few things: the advancement in highly complex medical services that extend the lives of terminally ill patients, the cost of specialty prescription drugs which can run well into six figures or beyond, and additional health threats (like the novel coronavirus), which have caused losses to steadily increase. Coupled with declining employment in the country due to the economic malaise, loss ratios have increased across the board.

While it’s common to see 20%+ increases in reinsurance this year, both in the last renewal cycle and this one partly driven by leveraged trend, there appear to be fewer new entrants looking to scoop up that business at a loss. So, we have repeatedly found ourselves in situations requiring 30%, 50%, and in some rare cases, even larger increases. Also concerning is the fact that many carriers are curtailing the offer of “no new lasers” contracts.

Our recommendation to clients is: When appropriate, consider taking on more risk with the thresholds, explore clinical case management solutions offered by the medical carrier to reduce high spend, and ensure your consultant is truly scouring all ends of the reinsurance market. We’ll often see our competitors approach only three carriers when a reinsurance marketing should include at least 10 carriers. But unfortunately, sometimes there are no solutions in a hard market other than paying up.

RELATED ARTICLE ON STOP LOSS:

Medical Stop-Loss Providers Ranked by 2019 Annual Premium Tops $23 Billion

Source: MyHealthGuide, 5/23/2020

The Medical Stop-Loss Provider Ranking has been updated based on 2019 Annual Premium.  In addition, Rankings from years 2018, 2017 and 2016 have been incorporated into a single table.

  • The top 96 stop loss providers are ranked.
  • The Medical Stop-Loss Provider Ranking table data reflect Direct Earned Premium from the “Accident and Health Policy Experience Exhibit” (“Supplemental Pages, Insurance Expense Exhibit” section) of publicly available Statutory Reports filed annually by each insurance carrier.

Click here to view The Medical Stop-Loss Provider Ranking

Stop Loss Premium Growth

Stop Loss premium based on 2019 annual premium is $23,588,932 (thousands), a 57% over 2016 annual premium of $15,004,224 (thousands) for a compounded annual rate of 16.2%.  Stop Loss premium totals by year:

  • 2019 – $23,588,932 (thousands)
  • 2018 – $19,849,233
  • 2017 – $16,451,079
  • 2016 – $15,004,224

Top 20 and Ranking Changes

The top 20 stop loss providers based on 2019 annual premium:

  1. Cigna
  2. CVS Health Corp (includes Aetna acquisition)
  3. UnitedHealth Group
  4. Sun Life Financial
  5. Anthem
  6. Tokio Marine HCC
  7. Voya Financial Inc.
  8. HCSC
  9. Symetra
  10. HM Insurance
  11. Humana
  12. Companion Life/Blue Cross Blue Shield of SC
  13. Swiss Re
  14. W. R. Berkley Corp.
  15. Western & Southern Financial
  16. Fairfax Financial (CF Ins)
  17. Blue Cross Blue Shield of MI
  18. QBE
  19. Nationwide
  20. National General Holdings Corp

In the new updated 2019 ranking, there were

  • 14 providers that did not change their ranking position from 2018.
  • 41 providers moved up in the ranking.
  • 26 providers moved down in the ranking.
  • 12 providers are new the ranking.

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

 

Industry news & updates @ www.RiskManagers.us

 

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