Benefits advisors and self-funded clients are entering a challenging renewal season.
“Stop-loss premium increases in 2026 are likely to be the biggest in recent memory, and it’s because of increasingly frequent and severe high-dollar claims,” Richard Fleder, a longtime investor and executive in the self-funded space, recently told me.
The stop-loss market grew to $35.4 billion in annual premiums in 2024, up from $31 billion the previous year, according to Stealth Partner Group. That’s a 12% increase.
Double-digit growth may look like a positive indicator, but in this case, it reflects both rate hikes and a market reacting to unsustainable cost trends.
The Costs
According to Sun Life’s 2024 High-Cost Claims report, claims over $1 million per 1 million covered employees rose 29% last year. They’re up 61% over the past four years.
Tokio Marine HCC data shows that self-insured plans were about 4.3 times more likely to receive $1 million claims in 2024 than in 2013.
Million-dollar claims just aren’t outliers anymore: These claims are becoming more common, and they’re driving fundamental shifts in underwriting, pricing, and risk-bearing strategies across the self-funded plan industry.
Both unbundled and bunbled “BUCA” (Blue Cross, UnitedHealthcare, Cigna and Aetna) stop-loss premium rates are climbing.
This year, Segal reports, average medical stop-loss premiums have risen nearly 10%, mainly due to medical cost trends.
Ripple Effects
Employers aren’t the only ones suffering.
Increases in the cost of care are affecting all players in the independent self-funded ecosystem, including the benefits advisors, the third-party administrators, the managing general underwriters, the captives and the carriers.
The shift is hurting the ability of stop-loss providers to offer rate caps.
Underwriting margins are tight. Specific deductibles are increasing.
“Laser” provisions – which limit or exclude coverage for certain individuals in a plan — are multiplying.
Complex provisions, like arrangements that aggregate specific stop-loss deductibles, are also growing in popularity.
TPAs are caught in the middle, trying to deliver service excellence while processing increasingly complex claims and supporting stressed plan sponsors.
Captive managers must deal with large fluctuations in pooled risk, and benefits advisors must deliver predictability and protection in a market that’s anything but predictable.
Better Alignment
To navigate this moment successfully, benefits advisors must foster better health plan alignment with TPAs, carriers, and stop-loss underwriters.
That means providing transparency at renewal time, real-time claim monitoring, and collaborative planning.
Many employers were caught off guard this year by sudden rate increases and changes in coverage contract terms. The key to helping employers avoid unpleasant surprises in 2026 is providing more data and analysis earlier in the policy cycle.
Ultimately, what’s needed is a shift from reactive risk mitigation to strategic financial design.
Adaptive Capital Planning
Benefits advisors can help employers make the shift by adopting an adaptive capital planning approach.
An adaptive capital planning strategy prioritizes liquidity, scenario modeling and cash planning as much as coverage selection.
The advisor helps the employer tap into the entire universe of carriers, MGUs, and captives, rather than simply showing the employer a short list of bundled and BUCA offerings.
A broad scope is essential when costs are on the rise because it allows for more competition, better coverage alignment with employer needs, and solutions for reducing the impact of high-dollar claims.
The strategy should also include employer access to a funding model that absorbs short-term volatility without undermining the long-term health of the plan.
Success is not about finding the cheapest premium: It’s about ensuring that the employer can withstand a $1 million-plus claim without destabilizing the business.
Strength With Flexibility
The stop-loss market will continue to evolve and is likely to continue to harden.
But that doesn’t mean employers should throw up their hands or return to fully insured arrangements.
Independent benefits advisors who guide clients toward flexible models, where capital strategies are adaptive and risks are better-shared, will come out of this moment stronger.