Executive Summary

Modest Market Growth.

Employer stop loss premium grew 7.9% in 2021 to $28.1 billion from $25.7 billion in 2020. Member months increased 3.2% to $731.1 million in 2021. The majority (59%) of the year-over-year premium increase is due to an increase in average member month rates rather than enrollment.

Premium Increases Trail Increase In Losses And Inflation.

This year, more than ever before, employers see investments in health and well-being as an essential part of workforce strategy, increasing from 36% in 2019 to 45% in 2020. This is spurred in part by the COVID-19 pandemic, shining a light on the connection between employee health and well-being and overall business performance.

Market Consolidation Continues.

The top 25 insurers accounted for 87% of all employers stop loss premium. The top ten accounted for 68%. Minimal membership growth and limited market movement (due to high persistency rates) will impede market competition, widen the gap between large and small insurers, and drive continued market mergers, acquisitions, and divestitures.

Use of Commercial Insurers Increases.

The commercial stop loss sector continues to increase market share, although slowly. The commercial market sector offers substantially lower PMM (per member month) rates and has performed better than the health plan sector.

Large Claims Continue to Grow.

Underwriters are reporting increasing frequency and severity of high-cost claims and are increasing their use of “lasers” and exclusions to mitigate these costs; aggressive claim, enrollment, and eligibility adjudication; and the application of pharmacy rebates to offset stop loss recoveries.

Inflation Assumptions May Need To Be Increased.

Health care CPI (consumer price index) increased an average of 3.2% in the first six months of 2022, compared to 1.2% for all of 2021. Health care spending was originally expected to grow at an average annual rate of 5.1%. Given recent inflation, these annual growth rates may be understated.

Authored by Conning