As the stop-loss market hardens, renewal protections matter more than ever 

The medical stop-loss market has hardened and that change is shaping renewals in ways many plan sponsors are not used to. Insurers have been faced with an increase in frequency and severity of high-cost claims, impacting loss ratios and, in turn, profitability. Leveraged trend is up approximately 5% across the industry. As a result, underwriters have become more conservative with their approach to renewals, and less aggressive on new business, even for well-running groups.

Insurers use leveraged trend as the baseline when developing renewal prices, before factoring in recent and historical claims experience. With the increase in that starting point, Mercer placements for the most recent January 2026 cycle showed an average renewal increase of 23%, up from 18% during the previous cycle. Even well-performing groups saw an average increase of 15%, rather than the single-digit renewals they have come to expect.

On the new-business side, insurers had previously been ultra aggressive on “clean” cases. It was not uncommon to see pricing well below current rates, as carriers fought to bring on profitable accounts. However, with the shifting market dynamics, insurers have become more cautious. Whereas the winning bidder often had to go below current rates in recent years, this most recent January 1 cycle saw winning bids at +5% on average. At the same time, insurers are now more selective in deciding when they will quote. Decline-to-quote rates have increased, leading to fewer options for employers. When the insurers do quote, they are often lasering ongoing claimants more frequently, shifting more risk to employers. Taken together, these market dynamics have produced an environment that makes it difficult for employers to find competitive options for their stop loss coverage.

Importance of renewal protections

With the hard market showing no signs of softening up, it is more important now than ever for employers to ensure they have proper renewal protections included with their stop loss coverage. Renewal rate caps, or the maximum allowable rate increase that the current insurer can propose, ensure employers can budget appropriately for a difficult year and reduce their downside risk. “No new laser” provisions guarantee that an insurer cannot exclude claimants from the stop-loss policy or set higher deductibles for certain members before they will reimburse claims. Without the combination of these protections in place, employers are exposed to unlimited liability at their next renewal. Given the state of the market, this can be a difficult situation in which to find oneself, with limited options for recourse.

Clinical oversight may result in reduced risk and better options

With the increase in frequency and severity of high-cost claimants, purchasing stop loss protection is likely not enough to keep costs down. Attention should be paid to the underlying risks, and claims should be appropriately managed to reduce future exposure. In order for this to happen, it is important to ensure that someone is monitoring the high-cost claims data and looking for alternative ways to reduce future risks. While medical administrators are paid to provide these services, history shows that additional oversight from an outside party usually produces better results. To the extent these clinical interventions can either reduce spend for current high-cost claimants or get in front of potential future high-cost claimants, these measures can go a long way toward improving experience and therefore producing better options from the stop loss market.

Bottom line: The market has changed and is more challenging to navigate; however, it is not without options. Employers should take notice of these changes and seek to understand the impact they may have on their upcoming strategy and budgeting process