Soaring US medical stop loss claims mean challenges for captives

What was once considered a catastrophic and rare medical stop loss claim in the US has now become commonplace, according to a report by the A&H Group, a member of the Tokio Marine HCC group of companies, published on July 7.

Its 2025 Annual Market Report revealed the challenges facing US businesses in offering competitive and affordable healthcare benefits, in what it described as an environment of increasingly frequent and severe stop loss claims.

The report, which looks at TMHCC’s own claims and loss ratio data, revealed the threshold that constitutes a “large claim” in medical stop loss has evolved. The frequency of stop loss claims above $2 million is now up 1,251% from their levels before the full effect of the Affordable Care Act in January 2014, which removed the cap on health benefit payments. 

Such an increase in claims will mean challenges for captives that write employee benefits business because many will rely on stop loss coverage from the commercial market to cover catastrophic claims.

The percentage point increase in frequency over the years is significant at all TMHCC’s large claim thresholds, each signifying exponential growth in claims per insured. In fact, the report found that the frequency of large claims was up this past year across four key stop loss reimbursement thresholds: $200K (46 points), $500K (75 points), $1M (112 points) as well as $2M (247 points).

Other key takeaways from the report included the fact that the top four most frequent types of stop loss claims have remained consistent since 2021, led by neoplasms/cancers, cardiovascular diseases, musculoskeletal/connective tissue and then digestive diseases.

It also showed that the top two categories of stop loss claims, neoplasms/cancers and cardiovascular diseases, make up over 48% of total costs in 2024, and have increased over the years from 44% in 2021.

The report also reveals that nervous system diseases, endocrine/metabolic diseases and infectious/parasitic diseases are emerging diagnoses in types of stop loss claims.

Jay Ritchie, president & CEO of Tokio Marine HCC – A&H Group, said: “As one of the largest carriers in the Stop Loss market, we found 2024 to be a year of significant change. The rising frequency of claims, particularly as hospitals seek to recover financially from the pandemic, have been contributing to a hardening market. Insurers are responding with higher rates and stricter terms all while the industry adapts to new AI capabilities.

“As these trends are expected to continue throughout the remainder of 2025, TMHCC will continue demonstrating a strong underwriting discipline, selecting risks carefully and maintaining relationships across the market to deliver quality service while challenging the status quo and adapting to emerging technologies.”

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