As brokers begin preparing clients for renewal season, one of the most important budgeting discussions centers on medical trend. While most self-funded groups understand the need to project healthcare cost increases, many are surprised to learn that medical trend and stop loss trend are not the same.
Helping clients understand that distinction leads to more realistic budgets, better renewal conversations and fewer surprises when stop loss quotes arrive.
Begin with industry medical trend forecasts
Each year, respected consulting firms publish medical cost projections based on claims data, provider pricing, utilization, prescription drug spending and healthcare inflation. No forecast can predict an individual group’s experience, but together these reports provide valuable context for budgeting. Comparing several independent forecasts often provides a more balanced planning range than relying on a single projection. Medical trend remains an important starting point, but it tells only part of the story.
Why stop loss trend is higher
Many groups assume that if medical costs are expected to increase by 10%, stop loss costs should rise by about the same amount. In reality, catastrophic claims often grow faster and stop loss reimburses the portion of a claim that exceeds the Specific deductible. As catastrophic claims become larger, a greater share of the increase falls above that deductible, creating a leveraged effect.
Consider a group with a $200,000 Specific deductible. If a catastrophic claim increases from $400,000 to $440,000, a 10% increase in total cost, the carrier's reimbursement rises from $200,000 to $240,000, a 20% increase. Because only costs above the deductible are reimbursed, increases in large claims are magnified for the stop loss carrier.
Generally speaking, the higher the deductible, the greater this leveraging effect becomes. Lower deductibles tend to behave more like first-dollar medical trend because a larger portion of each claim remains below the attachment point, the dollar threshold where stop loss coverage begins to reimburse eligible claims.
For brokers, this is an important concept to explain during renewal discussions, particularly when stop loss premium increases outpace a client's projected medical trend.
Why catastrophic claim costs continue to rise
Cancer remains one of the largest contributors to high-cost claims. Advances in immunotherapies, precision medicine and cellular therapies such as CAR-T have improved patient outcomes and, in some cases, are being used earlier in treatment. While these innovations represent significant clinical progress, they also contribute to substantially higher claim costs.
High-cost newborn care is another major driver. Advances in neonatal medicine have improved survival rates for infants born prematurely or with complex medical conditions but have also increased the cost of extended hospital stays and specialized care. Cell and gene therapies present another emerging challenge as treatments for rare diseases can exceed $2 million for a single patient. Although the use of these therapies remain relatively uncommon, their financial impact can be significant when they occur.
Market results reflect these pressures
Industry results reinforce what many brokers are already seeing during renewal season. While the stop loss market has experienced several consecutive years of double-digit premium growth, NAIC data shows overall stop loss loss ratios climbed above 90% in 2025—the highest level on record. And despite multiple years of significant premium increases, catastrophic claims have grown even faster.
It's important for policyholders to understand that stop loss renewals are influenced by more than the group’s own claims experience. Carriers evaluate broader pooled experience among similarly sized groups, deductible levels, industry segment, underwriting results and overall market conditions. As catastrophic claims increase across the market, employers with relatively stable claims may still experience meaningful renewal increases. Helping clients understand these broader market dynamics can reduce frustration and create more productive renewal discussions.
Helping clients budget with better context
Medical trend reports remain an essential budgeting tool, but they should not be viewed in isolation.
When helping clients develop next year's assumptions, brokers should encourage policyholders to:
1. Use several independent medical trend forecasts to establish a reasonable planning range.
2. Recognize that stop loss trend often exceeds underlying medical trend, particularly at higher specific deductibles.
3. Understand that rising cancer treatment costs, high-dollar newborn claims, and emerging cell and gene therapies continue to reshape catastrophic claim costs.
4. Expect stop loss renewals to reflect both their individual experience and broader market performance.
5. Consider increasing the plan’s Specific deductible to offset stop loss trend.
The broker opportunity
One of the most valuable services brokers provide is setting expectations before renewal. By helping employers understand why stop loss trend often outpaces medical trend, and how today's catastrophic claim environment is influencing the entire market, brokers can support more accurate budgeting, reduce renewal surprises and strengthen their role as trusted advisors.
While no forecast can predict an individual group’s experience, providing the right context allows clients to make better-informed financial decisions and approach renewal discussions with greater confidence.
