U.S. medical stop-loss insurance prices may increase in 2025 because some players have been charging too little for coverage in recent years, according to an executive at Sun Life Financial’s U.S. business.
Dan Fishbein, president of Sun Life Financial’s Sun Life U.S. unit, talked about U.S. stop-loss pricing Tuesday, during a conference call the company held to go over earnings for the second quarter, which ended June 30.
Some competitors had a few good years of results and then took an aggressive approach to pricing, Fishbein said.
“We generally did not participate in that,” Fishbein said. “Now, during some other competitors’ calls, they’ve talked about raising rates.”
That probably means that, starting Jan. 1, 2025, “the market starts to push pricing upward,” Fishbein said.
But Fishbein said he believes recent increases in stop-loss claims have been a predictable result of U.S. health care providers recovering from the effects of the COVID-19 pandemic, not any persistent, unexpected health care cost shifts.
What it means
For brokers, holding on to group health clients might be more difficult.
Finding employers that are angry about rising prices and want to hear about new ideas for holding down costs might be easier.
The backdrop
Sun Life Financial is one of the biggest U.S. providers of medical stop-loss insurance — arrangements that protect self-funded employer health plans against the risk of catastrophic claims or sudden flurries of claims.
Like other U.S. stop-loss providers, the Toronto-based company has seen an increase in claims in recent months.
The pandemic
COVID-19 forced hospitals and other health care providers to put off performing many types of procedures during the worst months of the pandemic, because of a need to use resources to care for people with COVID and fears about the possibility that patients who did not have COVID could come to the hospital and get COVID.
COVID also killed many doctors, nurses and support personnel, and some health care workers who were angry about the danger they faced and long hours left their jobs.
The result was that hospitals and other facilities performed fewer procedures, and health plan enrollees’ utilization of their coverage fell.
Even big hospitals had trouble with having enough doctors and nurses on staff.
Now, many big hospitals that were struggling to hire doctors and nurses are fully staffed, Fishbein said.
“What we’ve seen this year is a normalization of utilization, especially hospital utilization and things like outpatient surgery,” Fishbein said. “That normalization back to pre-COVID levels happened a little faster over the past two or three quarters than I think anybody was expecting.”
But, at the Sun Life U.S. stop-loss business, the ratio of claims to premiums for the year to date is consistent with the pricing targets, Fishbein said.
“Going forward, we see some signs that utilization is stabilizing,” Fishbein said.
The stop-loss cycle
“There’s been a historic, a classic underwriting cycle on stop-loss,” Fishbein said at another point during the call. “Three years of improving results, where pricing gets more aggressive and then three years of deteriorating results where pricing goes up.”
Fishbein suggested that the COVID pandemic may have stretched out the usual pricing cycle.
“We’ve seen a pretty aggressive pricing market in the last year, including currently,” he said. “We’re anticipating that pricing will firm as we head towards the Jan. 1 cycle.”
Sun Life U.S. has managed to increase market share in recent years by forming new marketing relationships, and it’s hoping conditions for sales will improve as companies that have underpriced correct their prices, he said.