Dan Fishbein, president of Sun Life Financial’s U.S. subsidiary, discussed stop-loss pricing in the U.S. on Tuesday during a conference call to discuss earnings for the second quarter ended June 30.
Some competitors had good results for a few years and then pursued aggressive pricing policies, Fishbein said.
“We generally haven’t participated in that,” Fishbein said. “Now, some other competitors have talked about price increases on calls.”
This likely means that starting Jan. 1, 2025, “the market will start pushing prices up,” Fishbein said.
However, Fishbein said he believes the recent increase in stop-loss calls is a predictable consequence of U.S. health care providers’ recovery from the impact of the Covid-19 pandemic and is not due to ongoing, unexpected health care cost shifts.
What it means
It may become more difficult for brokers to retain group health insurance customers.
It may be easier to find employers who are angry about rising prices and interested in new ideas for cost containment.
The background
Sun Life Financial is one of the largest U.S. providers of medical stop-loss insurance, agreements that protect self-funded employer health plans from the risk of catastrophic losses or a sudden wave of claims.
Like other U.S. stop-loss providers, the Toronto-based company has seen a rise in claims in recent months.
The pandemic
COVID-19 forced hospitals and other healthcare providers to postpone many procedures during the worst months of the pandemic due to the need for resources to care for COVID patients and concerns that non-COVID patients could potentially become infected in the hospital.
In addition, COVID killed many doctors, nurses and paramedics, and some healthcare workers, angry at the danger they faced and the long hours, were unable to stop working.
As a result, hospitals and other facilities performed fewer procedures and the use of health insurance benefits by insured persons decreased.
Even large hospitals had problems having enough doctors and nurses.
Many large hospitals that previously had difficulty hiring doctors and nurses are now at full capacity, Fishbein said.
“What we’ve seen this year is a normalization of utilization, particularly hospital utilization and things like outpatient surgeries,” Fishbein said. “That normalization back to pre-COVID levels has happened a little faster over the last two or three quarters than I think anyone expected.”
But in Sun Life US’s stop-loss business, the ratio of claims to premiums so far this year is in line with price targets, Fishbein said.
“We are seeing some signs that capacity utilization will stabilize in the future,” Fishbein said.
The stop-loss cycle
“There was a historical, classic stop-loss underwriting cycle,” Fishbein said elsewhere during the call. “Three years of improved results where pricing got more aggressive, and then three years of deteriorated results where pricing went up.”
Fishbein suspects that the COVID pandemic may have extended the usual price cycle.
“We’ve seen a pretty aggressive pricing market over the last year and currently,” he said. “We expect prices to firm up as we approach the January 1 cycle.”
Sun Life US has been able to increase its market share in recent years by establishing new distribution partnerships and hopes that sales conditions will improve when companies that have been offering prices that are too low correct their prices, he said.
