Employers facing stop-loss freeze might find refuge at Sun Life U.S.

Sun Life U.S. executives said early in 2024 that they saw signs that the post-COVID-19 drop in medical claims was ending, that medical costs were going to surge higher, and that they would have to increase rates accordingly.

Sun Life U.S. decided in the fourth quarter of 2024 that, in spite of the price increases made in response to the post-COVID surge, the prices were still 2% too low. The company then increases prices by 2 percentage points for employers renewing coverage in the first quarter of 2025.

"We have been able to get those increases," Fishbein said. "So, we feel that the business going forward is properly priced to reflect the experience that we're seeing. We were actually pleased with the stop-loss results in the second quarter."

Sun Life U.S. combines earnings for stop-loss and other types of employee benefits, such as dental insurance. The overall benefits and stop-loss earnings were a little lower than they were in the second quarter of 2024, but "very much in line with the expectations that we laid out."

Sun Life U.S. has seen only about 12% of the claims it expects to get for the employers that started stop-loss plan years Jan. 1. "But, what we've seen so far is similarly reassuring," Fishbein said.

Kevin Strain, Sun Life Financial's CEO, also emphasized that the Sun Life stop-loss business has been doing well — and he hinted that the company is happy to sell new stop-loss coverage.

"The U.S. employee benefits business hit record earnings quarter, and our stop-loss business in the U.S. performed well at a time when the industry is seeing challenges," Sun Life Financial CEO Kevin Strain told the analysts. "This reflects our leadership in the stop-loss market.... Stop-loss continues to be a foundational part of our U.S. business and strategy."

Sun Life Financial, the Toronto-based parent of Sun Life U.S., held the conference call to go over earnings for the second quarter, which ended June 30.

Sun Life streamed the conference call live and posted a link to a recording on its website.

What it means: Sun Life U.S. might join its competitors in taking a "disciplined approach" to increasing stop-loss prices, but it seems less likely to block the email addresses of employers seeking new stop-loss coverage.

The backdrop: Stop-loss insurers protect employers' self-insured health plans against catastrophic losses. They try to learn about serious cases earlier, but they may first hear of some claims that will hit an employer's stop-loss "attachment point," or deductible," six months or more after the patients get into terrible accidents, suffer heart attacks or learn they have cancer.

Some stop-loss issuers said early in 2024 that they thought claims were running high.

Sun Life U.S. executives started off suggesting the competitors had underpriced their coverage, but, toward the end of 2024, it too agreed that claims were significantly higher than expected.

Related: Sun Life sees stop-loss problems spiking: Will it force employers to buy fully insured coverage?

This summer, stop-loss issuers seem to have different perspectives about how well they're getting the ratio of stop-loss insurance claims to premiums under control.

Executives at Cigna and Voya have both suggested in recent weeks that stop-loss claims have continued to run high this year.

Cigna executives said that they expected stop-loss claims to be high but that claims now seem to be within expectations.

Voya executives emphasized repeatedly that claims have been high, that they want the sales team and pricing underwriters to sync up, and that they will accept losing business rather than risk writing money-losing stop-loss insurance.