Medical stop-loss coverage protects organizations that self-insure their health plans from catastrophic medical and prescription drug claims. It has long been a valuable tool for small- and medium-sized employers seeking to limit their financial exposure to unexpected, high-cost claims. However, as healthcare and insurance dynamics shift, even large employers are increasingly turning to stop-loss coverage, particularly through captive insurance models.

1. Hardening Markets and Rising Premiums

Insurance markets have been hardening, with factors such as the lingering effects of the COVID-19 pandemic, economic uncertainty, and climate-related disasters (e.g., California wildfires, Hurricane Milton, etc) driving up premiums. Providers face higher operational costs due to regulatory changes and rising healthcare utilization, pushing insurers to reassess risks and raise prices. For self-insured employers, these market shifts result in increased reinsurance costs and reduced flexibility.

Captive medical stop-loss programs offer protection from these rising premiums by allowing employers to control claims funding and reserves. Captives offer a more customized solution compared to traditional insurers, enabling companies to mitigate costs while maintaining financial stability.

2. Volatile Claims and High Costs

Healthcare claims have become more unpredictable, especially with the rise of costly specialty treatments such as gene therapies and cancer drugs. This unpredictability can make it difficult for employers to forecast healthcare costs. A well-structured medical stop-loss program smooths out this volatility, helping employers manage cash flow by transferring risk to a captive. This approach allows for more predictable healthcare spending, similar to a fixed-premium model, despite the fluctuating nature of claims.

3. Rising Healthcare Costs

Healthcare costs continue to rise sharply, projected to increase by 8% annually due to higher care utilization and rising specialty medication costs. Traditional cost-shifting methods like high-deductible plans are no longer sufficient. Medical stop-loss coverage through captives offers a long-term solution by allowing employers to establish formal reserves and fund future high-cost years. This enables them to take a proactive approach to managing healthcare costs while improving benefits offerings.

4. Enhanced Control and Transparency

Captive stop-loss programs give employers more control over plan design and claims management. With greater access to data, employers can make informed decisions about cost drivers and health management initiatives. They can also secure better rebates on pharmacy benefits, reducing overall spending. Employers using captives as a purchasing platform to carve out pharmacy benefits, see overall Rx spend decrease, often saving 15-30% on net pharmacy claims. Captives provide the flexibility to tailor coverage to an employer’s unique needs, aligning with broader financial and risk management strategies.

A Multi-Layered Protection Strategy

In a volatile healthcare environment, captive medical stop-loss coverage offers employers a customizable, multi-layered approach to risk management. It enables organizations to not only manage current challenges but also shape a sustainable future for their healthcare benefits.

As spring unfolded, the 2025 Disability Management Employer Coalition (DMEC) Compliance Conference brought together absence management professionals from across the nation to explore emerging trends, compliance strategies, and innovative solutions in the world of leave management. Held in Columbus, Ohio, this year’s conference offered in-depth sessions on pressing issues, including compliance, mental health accommodations, technological advancements, and diversity in the workplace. Here’s a look at some of the key topics that were discussed:

1) Navigating Complex Compliance Challenges

With the ever-changing landscape of leave and accommodation laws, staying compliant remains a top priority for employers. This year’s conference offered valuable insights into managing the intersection of federal and state regulations. Experts shared practical advice on how to avoid common mistakes and streamline compliance efforts across diverse workforces. Here are some noteworthy sessions:

This session offered a deep dive into upcoming changes to the Department of Labor’s regulations and what HR teams need to do to stay ahead of the curve.

Speakers unpacked the complexities of these intersecting laws and shared strategies for managing situations where they overlap.

Our team was joined by a regulator, attorney, carrier, and employer to outline the different use cases and provide audience members with a framework for making a decision about whether they should file a private plan or stay with the state.

2) Mental Health Support

Mental health remains a cornerstone of today’s workplace benefits, and the conference didn’t shy away from tackling this critical issue. Sessions focused on creating a supportive environment for employees experiencing mental health challenges. These discussions provided actionable strategies for maintaining compliance while prioritizing employee well-being:

Experts explored best practices for managing mental health claims, with a focus on the unique complexities of psychological disabilities in the workplace.

This session helped employers navigate the delicate balance of offering accommodations while staying compliant with ADA and FMLA guidelines.

A deep dive into how mental health conditions are handled under Long-Term Disability (LTD) policies and the ongoing challenge of achieving true mental health parity in benefits.

3) Innovations in Leave and Accommodation Management

Technology continues to transform the way employers manage leave and disability claims. This year’s conference highlighted cutting-edge tools and strategies, including the use of artificial intelligence (AI) to streamline compliance processes, as well as other technologies to support for disability management. These sessions explored how employers can leverage technology and data-driven insights to improve leave management and drive better outcomes:

This session explored how AI is reshaping leave management, helping employers automate compliance and improve accuracy in decision-making.

One of the most forward-thinking sessions, this presentation discussed the growing role of psychedelic-assisted therapies in managing mental health conditions in the workplace.

Participants learned about five new tools designed to optimize Return-to-Work (RTW) and Stay-at-Work (SAW) programs, improving the experience for both employers and employees.

The 2025 DMEC Compliance Conference provided a comprehensive overview of the challenges and opportunities facing HR and absence management professionals today. From navigating complex compliance requirements to embracing new technologies and supporting employee mental health, the conference highlighted the evolving nature of leave and accommodation management. With valuable insights and actionable strategies, attendees left the conference better equipped to address the needs of their diverse workforces while staying compliant with an ever-changing legal landscape. We’re already looking forward to what next year’s conference will bring!

We’re excited to announce that our Analyst, Spencer Towle, was featured in Captive International’s FORTY Under 40 Awards this year! The award spotlights the most influential figures in captive insurance under the age of 40. You can find his winner Q&A responses here.

We’re excited to announce that our Consultant, Aviel Shalev, was featured in Captive International’s FORTY Under 40 Awards this year! The award spotlights the most influential figures in captive insurance under the age of 40. You can find his winner Q&A responses here.

We’re excited to announce that our Senior Consulting Actuary, Nick Frongillo, was featured in Captive International’s FORTY Under 40 Awards this year! The award spotlights the most influential figures in captive insurance under the age of 40. You can find his winner Q&A responses here.

We’re excited to announce that our SVP, Prabal Lakhanpal, was featured in Captive International’s FORTY Under 40 Awards this year! The award spotlights the most influential figures in captive insurance under the age of 40. You can find his winner Q&A responses here.

In a recent Financier Worldwide Podcast episode, our SVP, Prabal Lakhanpal speaks about what captive insurance entails; the drivers behind its growing popularity; how businesses can apply it to fund their risks and bridge gaps in coverage; how it can lead to greater capital efficiency and better structuring of risk; and what the next evolution of captives might be. You can find the full episode here.

Captive International recently released its Forty Under 40 Awards, which spotlights the top industry leaders under 40 years old impacting captive insurance. We are excited to announce that four of our colleagues were on this list this year! You can find the full list here.

Prabal Lakhanpal (Senior Vice President)
Nick Fongillo (Senior Consulting Actuary)
Aviel Shalev (Consultant)
Spencer Towle (Analyst)

In a recent article on Captive.com, spotlighting the CICA session, “Employee Benefits and Medical Stop-Loss: A Partnership between HR, Finance, Risk, and Markets,” our SVP, Prabal Lakhanpal explains the legal process of setting up a captive and results employers can expect. You can find the full article here.