Employers purchase stop-loss insurance to limit their risk from unexpected high cost claims by transferring that risk for medical costs above a specific individual or aggregate employer dollar amount.
In February, Elevance Health told Becker’s it plans to acquire Granular Insurance Company, a stop-loss insurance subsidiary from Verily, a sister company of Google. The move signals interest in further investment in the company’s commercial business, especially amid ongoing headwinds within the Medicare Advantage and Medicaid spaces.
Granular was launched in 2020 and offers medical stop-loss, reinsurance and fronting products using “innovative, proprietary technology,” according to Elevance.
While Elevance looks to push further into the stop-loss business, Cigna executives told investors in January that the company faced higher-than-expected costs in the fourth quarter, in part driven by higher medical costs within its stop loss product. Executives cited a rise in specialty medications such as Keytruda and Ocrevus as one reason behind the climbing costs.
“And then on the high acuity surgical side, think of that as more tilted to inpatient procedures, for example, oncology and cardiac-oriented procedures,” Cigna Group CFO Brian Evanko said. “So that was really the core of the upward pressure on the stop loss products.”
Cigna executives said the company began adjusting its pricing in the third quarter as these trends emerged, but they did not fully account for the cost acceleration that intensified toward the end of the year. Since much of the 2025 stop-loss renewal pricing was already locked in by the time the issue was identified, Cigna expects its medical cost ratio for the product to remain elevated in 2025.
As a result, Cigna is implementing pricing adjustments, cost-efficiency efforts, and other measures to recover margins across its broader insurance segment over the next two years, with most of the recovery expected in 2026.
Cigna Group reported a year-end net income of $3.4 billion, down 34% year over year. The company’s medical loss ratio was 87.9% in the fourth quarter, compared to 82.2% during the same period last year.
“We are taking corrective actions on this near-term pressure and expect to recapture margin over the next two years,” Cigna Group CEO David Cordani said. “This is a specific issue we identified and are mitigating, and I’ll reinforce that we believe our U.S. employer and Cigna Healthcare businesses are strong and remain well positioned, and we’re confident in our long-term growth strategy.”
