Specialty Drugs, Expensive Surgeries Driving Stop-Loss Insurance Costs

Companies that self-insure their group health benefits, or are in partial self-insured plans called level-funding, are likely to see higher stop-loss insurance renewal rates due to the rapidly increasing costs of specialty drugs and cancer surgery claims.

Stop-loss insurance steps in to pay claims when they reach “catastrophic levels,” or if the aggregate amount of claims exceeds a set dollar amount. The increases in stop-loss insurance rates are also likely to affect group health plan providers, which typically pass on their higher costs to employers.

Executives of Cigna Corp., which provides medical stop-loss coverage to employers, warned of the coming wave of stop-loss increases during the company’s Q4 2024 earnings call with analysts in late January. Brian Evanko, the company’s chief financial officer, said that Cigna’s stop-loss insurance costs had spiked in the fourth quarter.

The main drivers of the cost increase were:

• Spending on costly injectable specialty drugs, like Keytruda, an anti-cancer drug, and
• Higher spending on inpatient surgeries for serious conditions such as cancer and heart problems.

Cigna’s experience mirrors what’s been happening in the overall stop-loss insurance market.

From 2022 through 2024, the overall individual coverage stop-loss insurance premium rates grew at an annualized rate of between 10.4% to 13%, depending on the deductible size, according to the 2024 “Aegis Risk Medical Stop Loss Premium Survey.”

Deductibles are usually in increments of $100,000 per claim. The average monthly premium per employee for a $100,000 individual deductible was $210.80 per month last year, while for a $500,000 deductible the cost was $46.30 a head.

Sun Life, another stop-loss insurer, has noted equally rising costs. In its 2024 “Sun Life Stop-Loss Research Report,” it said that:

• Million-dollar claims rose 8% on a claims-per-million-covered-employees basis
  between 2023 and 2024, and were up 50% over the past four years.
• Average cost of cardiovascular disease treatment was up 33%, higher than expected given medical inflation, and significantly higher than average cost for all claims, which was 5.9% over the same period.
• Five new drugs entered the 20 high-cost injectable drugs list in 2023; two are used
  primarily in the treatment of cancer, and one each for immunodeficiency disorders, gout and blood disorders.

The takeaway

If you are a self-insured employer or have a level-funded plan, you’ll want to budget for these higher stop-loss rates as you will likely see your premium rise.

You can always tinker with your deductible as well to lower your costs, but that could mean holding more of the bag for any high-dollar claims. But you can also take steps to address your health plan’s cost drivers. For example, you can:

• Consider encouraging your employees to engage in programs that focus on general health management, such as monitoring of blood pressure and blood sugar, weight management and exercise to improve their overall health.
• Ensure that your employees have access to mental health services, particularly those who are dealing with a chronic or acute high-cost condition.
• Ensure plans offer coverage for preventive care during pregnancy.
• Provide assistance to employees who are having trouble navigating the health care and health insurance system.

Finally, to get a good understanding of your potential costs and for planning purposes, you should know the average cost of various high-cost claim conditions. Sun Life’s report has extensive lists of how much these types of claims are costing. You can find it here.