As the cost of healthcare in the United States is constantly increasing, healthinsurance premiums are tracking along on a similar upward trajectory.In recent years, these rising insurance costs have prompted more employersto transition out of fully insured pools into self-funded arrangements wherethey have more flexibility in plan design. While employers can exert morecontrol over their healthcare spending, that control comes with risks, whichis why stop-loss insurance is an integral part of most self-funded plans.
Although the stop loss marketremains unsettled coming into 2021, carriers are gaining a better understanding of the long-term implications the COVID-19 pandemic is having on claims experience, allowing for more confident predictions in some cases. However, there are many other factors contributing to uncertainty and volatility as we look toward 2022. As predicted in our Q3-Q4 2020 Market Update, aggregate claims remained suppressed due to COVID-19 restrictions. Several carriers predict the decrease in frequency of small specific claims is a trend that will persist throughout the remainder of 2021, while others believe an increase in specific claims will be realized in 2021 due to delayed testing and treatment. These carriers feel that if this increase in the frequency and severity of large claims goes unmanaged, it will serve as a harbinger of volatility and uncertainty for years to come. As a result, pricing for stop loss moving forward will vary greatly by market.
The stop loss market continues to harden with high loss ratios and an 86% increase in catastrophic claims over the past four years. The overall effect of COVID-19 on the stop loss market remains unknown despite the fact that large numbers of COVID-19 claimants never materialized. Cases running well continue to have access to favorable contract provisions, but we expect pending specialty drug approvals, emerging gene therapies and COBRA provisions related to the pandemic will impact rates well into the coming year.