Stop-loss premiums increased 16% from 2021 to 2023, survey finds

High-dollar claims remain a key driver of increased costs in employer-sponsored health plans. As a result, individual stop-loss premiums increased by 7% to 16% or more from 2021 to 2023, according to the latest Aegis Risk Medical Stop-Loss Premium Survey, which was cosponsored by the International Society of Certified Employee Benefit Specialists.

“This dynamic, known as leveraged trend, occurs as the underlying increase in expense of a catastrophic medical claimant is fully borne by an unchanged stop-loss deductible from one year to the next,” the report said.

Stop-loss insurance provides protection to self-funded health plans against large and unpredictable expenses that can arise when:

• One plan participant has catastrophic medical bills (known as specific or individual stop-loss coverage) or
• A higher frequency of overall claims is substantial (known as aggregate coverage).

Individual stop-loss coverage deductibles often are tied to the underlying employee population size and risk tolerance of the plan sponsor. They can range from as low as $50,000 to as high as $1 million or more per covered participant per policy year. As a result, the average premium cost per covered employee is highly variable and depends on the size of the deductible. The survey found that the average monthly premium per covered employee is $193 with a $100,000 deductible; $44 with a $500,000 deductible; and $14 with a $1 million deductible.

Aggregate stop-loss coverage is most prevalent in conjunction with individual stop-loss deductibles of $250,000 or less and enrollments around or below 1,000. It becomes less common at higher deductibles and/or enrollments, because those plans tend to be more stable. The most prevalent level, cited by 93% of respondents with aggregate coverage, is 125% of expected health claims. Average monthly premiums vary by size of the individual stop-loss deductible, but the median premium overall is $8.55.

Read more: Addressing gaps in your employee benefits package today

One-fourth of respondents reported a catastrophic claim in excess of $1 million over the last two years, with 7% of those in excess of $2 million. These catastrophic claims result from more aggressive hospital billing as well as specialty pharmacy and orphan drug therapies. Forty-two percent of respondents reported that none of their catastrophic claims exceeded $500,000.