Guy Carpenter / Oliver Wyman publish MSL report

Guy Carpenter and Oliver Wyman has published their inaugural joint Stop Loss Market Update, which they said highlights the significant growth seen in the stop loss market, profitability challenges seen with recent market trends, the growing impact of high-dollar claims and therapies, and emerging opportunities to look at the stop-loss market in new ways via AI and advanced analytics.

The Update said that Stop loss carrier premium volume increased to $31.6 billion in 2022, reflecting a growth rate of 13.4% from 2017–2022 with 10% of the annual growth attributable to cost trends and business mix changes, and the remainder due to increased enrolment.

Claims increased at a faster rate resulting in loss ratios deteriorating from 78.5% in 2017 to 84.1% in 2022.

According to the Update, with the increase in healthcare costs and continued pressures from inflation, employers are actively seeking alternatives to control costs. Enrolment in the fully insured medical market has declined by 14.2% since 2017 as employers are migrating to self-funding mechanisms as alternatives to lower costs. The increase in claims over $1 million in the past five years is a growing concern for insurance and reinsurance companies.

In addition while overall medical trends have been reasonably stable in about the 4% range over the past five years, leveraged trends for higher attachment points have been as high as 20+% driven by complex inpatient claims, including neonates, as well as increased costs for injectables and dialysis, along with emerging costs for cell and genetic therapies. Healthcare and large claims applications of advanced analytics Advanced analytic and AI applications are increasingly useful in addressing large claims.

The Update added that emerging techniques, including using previously underutilised data to predict large claims are promising tools to address challenges in managing the increasing exposure stop loss insurers have to high dollar claims.

For more information, contact Guy Carpenter / Oliver Wyman.