Voya is doubling stop-loss price increases for 2025

Voya Financial is unhappy with the performance of its stop-loss insurance business, and the company is prepared to lose customers to get prices up to profitable levels, executives said Tuesday.

The average rate increases for coverage renewing in January 2025 will be twice as big as the average rate increases for January 2024 renewals were, Don Templin, Voya’s chief financial officer, said during a conference call with securities analysts.

“This includes a focus on retaining cases that are performing well while ensuring we improve margins on underperforming blocks,” Templin said.

Voya is also increasing prices for new customers, and it is more interested in establishing adequate profit margins than in increasing premium revenue, Templin said.

“Because we are prioritizing higher rates, we do expect lower sales and in-force premiums, year-over-year, for the January 2025 book,” Templin added. “We are confident that our pricing and underwriting actions will significantly improve net underwriting results next year.”

Stop-loss basics: Stop-loss insurance is a product that self-funded employer health plans and other types of plans use to protect themselves against catastrophic losses.

Insurers generated about $35.5 billion in U.S. stop-loss premiums in 2023, according to analysts at Marsh McLennan’s Oliver Wyman and Guy Carpenter units.

The stop-loss policies backed plans that cover 61 million people, and the stop-loss protection itself cost an average of about $48 per covered plan enrollee per month.

Earlier this year, the Segal Group, a benefits and compensation consulting firm, estimated that the medical stop-loss premiums increased an average of 11.5% before plan changes this year, down from an average increase of 13.4% before plan changes in 2023.

The history: Back in August, executives from Voya acknowledged that higher claims costs would lead it to increase 2025 stop-loss premiums.

Related: High claims push Voya 2025 medical stop-loss rates higher

Executives from a rival, Sun Life Financial suggested that competitors had underpriced their stop-loss coverage.

The third quarter: Voya’s stop-loss business collected almost $453 million in premiums in the third quarter and paid about $424 million in benefits, giving it an operating gain of $28 million, according to the company’s latest quarterly financial report.

The operating gain was down from $51 million in the third quarter of 2023, and the ratio of benefits to premiums increased to 93.4%, from 83.3%.

Sales of new stop-loss coverage fell to $35 million, from $67 million.

Although premiums at the stop-loss business exceeded benefits payments, and the severity of the claims was comparable to that reported in the past, increased claim frequency was observed across most categories, the company says.

Sun Life Financial’s experience: Another big stop-loss player, Sun Life Financial, reported that its medical stop-loss premium and fee revenue increased to $693 million in the latest quarter, from $646 million in the third quarter of 2023.

The company’s stop-loss sales fell to $68 million, from $69 million.

Sun Life did not publish separate stop-loss operating gain figures, but Dan Fishbein, the president of the company’s Sun Life U.S. unit, said its stop-loss insurance loss ratios are at or below the levels the company used when it came up with its current stop-loss prices.

The COVID-19 pandemic temporarily cut use of health care services. Some stop-loss providers may have set prices based on the low care utilization rates recorded during the worst years of the pandemic, Fishbein said.

Sun Life believed that utilization would recover, and it set its stop-loss rates based on that expectation, Fishbein said.

“We’ve always been a very conservative pricer,” Fishbein said.

Because Sun Life built a return to pre-pandemic utilization rates into its stop-loss prices, its current stop-loss prices are adequate, even though utilization rates are up, Fishbein said.

But “no question that pricing is going to harden in the near future,” Fishbein said.