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U.S. employers with self-insured health plans watched a lot more huge claims show up in 2024.
Self-insured plans were about 4.3 times as likely to receive $1 million claims in 2024 than in 2013, according to Tokio Marine HCC's latest annual stop-loss market report.
The Houston-based stop-loss carrier does not publish the underlying $1 million claim frequency counts, but a broker revealed in 2022 that Tokio Marine HCC reported seeing about 20 $1 million stop-loss claims per 1 million employees. That means it's now seeing a frequency of more than 80 $1 million claims per 1 million employees per year, or about one $1 million claim per 12,500 employees.
Counts also increased for other jumbo claim categories. For $2 million claims, for example, a self-insured employer was about 13.5 times as likely to receive a claim at that level in 2024 as in 2013. In 2023, a self-insured plan was about 11 times as likely to receive a $2 million claim as in 2013.
But the average size of the jumbo claims was a little smaller in 2024 than it was the year before.
For claims that exceeded the stop-loss deductible by at least $1 million, the average stop-loss claim severity fell 3.8%, to $1.76 million.
Cancer accounted for 35.1% of the cost of stop-loss claims in 2024, up from 33.5% in 2024.
COVID-19 made respiratory diseases responsible for 7.9% of stop-loss claim costs in 2021 and 4.3% of the total in 2022, but, thanks to the easing of the COVID epidemic, respiratory diseases stopped showing up as a top stop-loss cost driver in 2023 and 2024.
What it means: Employers may have to make tough choices about their self-insured plans.
Jay Richie, the chief executive officer of Tokyo Marine HCC's A&H Group unit, said in a message included in the report that his company expects to see the kinds of trends reflected in the annual report continue for the rest of this year and into 2026.
"The cost of health care will continue to rise, and we believe the market will remain a tightening market on rates and terms," Ritchie said.
Stop-loss basics: Stop-loss insurance can protect employers' self-insured benefit plans against catastrophic losses.
In the past, most stop-loss users were large employers. Today, level-funded plan arrangements and other arrangements help relatively small employers self-insure their health plans.
Market trends: Sun Life Financial, Voya and other insurers in the stop-loss market said they saw a surge in claims starting in mid-2024.
Related: Employers' $1M health claim rate rises 29%
Details about what caused the surge have been scarce.
The Affordable Care Act has likely contributed to the increase in the number of jumbo claims by prohibiting insurers and plans from putting annual or lifetime limits on coverage for the types of care included in the ACA "essential health benefits" package. That includes most forms of ordinary medical care.
Today, one obstacle for employers and stop-loss insurers trying to avoid large claims is general medical cost inflation. Another is aggressive efforts by health care providers to resist a wide range of cost-management strategies, such as insurers' efforts to review requests for coverage before care is provided and to deny payments for what appear to be overly excessive claims.
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