Blog

September 9, 2026

How Self-Funded Employers Can Manage Rising High-Cost Claims

What counts as a high-cost claim depends on the plan, as the numbers are all based on the self-funded employer's own stop-loss deductible.
Stop-loss insurance may pay for a catastrophic claim this year, but the carrier will get its money back through higher premiums at renewal. So the employer ends up covering the claim anyway.
The most reliable way for self-funded employers to reduce high-cost claims is to influence the episode early, starting with which doctor an employee sees first.

One employee with a serious diagnosis can generate more than $1 million in medical claims, and lately, the number of claims that size is multiplying. Sun Life's 2025 high-cost claims report counted 29% more million-dollar claims per million covered employees than the year before, and 61% more than four years earlier. For self-funded employers who pay medical claims out of their own budgets, high-cost claims decide whether the plan year ends on budget or well over it.

Stop-loss insurance can soften the immediate hit, but it carries a catch that may surprise many benefits teams. The carrier pays this year's excess, but it then prices that claim into the next year's premium. So the employer pays either way, just on a slight delay. That’s why managing high-cost claims means more than insuring against them. It means reducing how many severe episodes happen at all.

What counts as a high-cost claim for a self-funded employer

Most benefits teams draw the line somewhere between $50,000 and $100,000, but there is no industry-standard definition. For a self-funded employer, the threshold that matters is the plan's stop-loss deductible. Below that number, the plan pays every dollar of a claim itself. Above it, the stop-loss carrier reimburses the excess.

Most large employers carry this risk themselves because self-funding is now the norm. In KFF's 2025 Employer Health Benefits Survey, 67% of covered workers were enrolled in a self-funded plan. That’s because, in some years, self-funding can work in the employer’s favor. When claims come in below what a carrier would have charged in premiums, the employer gets to keep the difference as savings. However, the inherent risk is that in years where high-cost claims arise, there is no carrier to absorb them.

Why high-cost claims are rising

Employers named cancer their top cost driver for the fourth straight year in Business Group on Health's 2026 Employer Health Care Strategy Survey. In fact, claims data shows that malignant neoplasms alone generated $1.2 billion in Sun Life's stop-loss claims across roughly 5,000 claims in 2024, triple the spend of the second-place cardiovascular disease.

However, cancer is not the whole story. Musculoskeletal and orthopedic conditions entered Sun Life's top three claim categories for the first time, driven by volume rather than severity. The average claim in the category runs about $116,000, modest by catastrophic standards, but the claims came in such numbers that the category totaled $1.18 billion.

At the other end of the spectrum, a few rare conditions keep getting more expensive to treat. The average congenital anomaly claim has grown 70% since 2021, to $335,000, and new cell and gene therapies are reaching the market priced in the millions of dollars per patient.

Claim category	Why it drives high-cost claims	What the data shows*
Cancer	Costly specialty drug regimens and long treatment courses	$1.2 billion across roughly 5,000 claims, the costliest category
Musculoskeletal and orthopedic	High claim volume rather than per-claim severity	$1.18 billion total, about $116,000 per claim on average
Cardiovascular	Frequent severe episodes	Second-costliest condition category
Congenital anomalies	Treatment costs rising quickly per case	Average claim up 70% since 2021, to $335,000

*Data sourced from Sun Life's 2025 high-cost claims report.

How one claim lands on a self-funded budget

Spread across 500 employees, a single $1 million claim adds $2,000 per employee to the year's medical costs. Looking at it a different way, that one claim equals the full annual premium for about 37 families, based on the $26,993 average family premium KFF reported for 2025. A claim that size leaves three options, and none of them are particularly appealing. Either the plan absorbs the loss, employees contribute more, or benefits get trimmed somewhere else.

And these claims are hitting budgets already stretched by the broader healthcare cost crisis. Employers in Business Group on Health's 2026 survey projected a median 9% increase in health care costs for 2026, trimmed to a projected 7.6% only after plan design changes. Garner's client renewal data shows the same thing. For most of the past decade, roughly 6–10% of employers faced a renewal of 15% or more, and that share has now surged past 25%.

Where stop-loss insurance helps

Specific stop-loss reimburses the plan once one person's claims pass a chosen deductible, which commonly ranges from $50,000 for smaller plans to $500,000 or more for large ones. Aggregate stop-loss caps the plan's total claims for the year. Together, the two coverages put a ceiling on what a bad year can cost, and nearly every self-funded employer carries at least the first.

Where stop-loss falls short

Stop-loss pays this year's excess, then the carrier prices that claim into next year's renewal. When an employee has an ongoing million-dollar condition, the carrier responds in one of two ways. It raises the whole plan's premium, or it puts a laser on that employee, a higher deductible that applies only to that person's claims going forward. Some carriers decline to renew at all. The coverage changes when the employer has to pay for these claims, not whether it pays.

Five ways self-funded employers can manage high-cost claims

Stop-loss only spreads out the cost of a claim that has already happened. The five strategies below shrink the number of claims that get that far.

Watch the claims data for early signals

Self-funded employers own their claims data, and the data usually shows a catastrophic claim coming before the biggest bills arrive. A new specialty drug prescription, declining kidney function that points toward dialysis, or a fresh cancer diagnosis all appear months before the spend peaks.

Ask the TPA or carrier for monthly high-cost claimant reporting with defined triggers rather than a single annual review. That way the plan can act while there is still time to help the employee find the right care.

Help employees reach high-quality providers first

The most expensive version of a medical episode is often the one that starts with the wrong doctor. A missed diagnosis, a surgery that clinical guidelines would not support, or a complication from a low-performing surgeon can turn a manageable condition into a catastrophic claim. The rate of surgeries performed against clinical guidelines has nearly doubled. Quality varies enormously between doctors in the same network and the same specialty, and employees cannot see that difference on their own.

Employers can guide employees to high-performing doctors at the first appointment through quality data, navigation support, or financial incentives. The ones that do prevent some share of severe episodes instead of paying for them.

This is the problem Garner was built to solve. It applies 550+ proprietary clinical metrics to a dataset of over 320 million patients to find the best-performing doctors already in a plan's network, then helps cover employees' out-of-pocket costs when they see one. On average, 46% of members use Garner to find a Top Provider. Employees end up in front of doctors who follow the latest research and avoid unnecessary procedures, before a manageable condition has the chance to become a catastrophic claim.

Support employees already in a high-cost episode

Once a serious diagnosis hits, the plan's job shifts from prevention to guidance. Second opinions change diagnoses and treatment plans often enough to justify making them standard for major procedures, and dedicated case management keeps care coordinated across a long episode. Centers of excellence extend the same idea to the costliest conditions. In the same Business Group on Health survey, about half of employers said they will offer a cancer center of excellence in 2026.

Manage where care is delivered

The same treatment can carry wildly different prices depending on the setting. An infusion administered in a hospital outpatient department can cost several times what it costs in a physician's office or at home, and specialty drugs often have cheaper dispensing channels than the default one. Site-of-care reviews and specialty pharmacy programs lower the price of a high-cost episode without changing the care itself.

Revisit the stop-loss contract every year

Deductibles, lasers, and renewal caps are all negotiable, and the right structure depends on the plan's cash position and appetite for risk. A no-new-lasers guarantee or a multi-year rate cap costs more up front and can save far more after a bad claims year. Employers who take the coverage to market every few years keep carriers honest on price.

Managing high-cost claims starts before the claim

No employer can prevent every million-dollar claim. Some diagnoses arrive without warning, and the plan's job in those moments is to help the employee get the best possible care. But much catastrophic spending traces back to steerable decisions.

Which specialist an employee saw first, whether a surgery matched clinical guidelines, and where an infusion was billed all shape whether an episode stays manageable. Self-funded employers have more control here than most assume. The ones who watch their data, guide employees toward high-performing doctors, and treat stop-loss as a backstop rather than a plan see fewer claims spiral. And when one does, they see it coming sooner.

Garner does that steering work for employers. It reimburses employees when they see the best-performing doctors already in their network, and its clients lower plan costs by 12% on average with no network changes required. Curious how many of your plan's high-cost claims were steerable? Book a demo with a member of Garner's team to learn how we can help you manage your high-cost claims.

FAQs

What is considered a high-cost claim for a self-funded employer?

There is no fixed industry threshold, though most benefits teams flag claims above $50,000 to $100,000. For a self-funded employer, the practical definition is any claim approaching the plan's specific stop-loss deductible, because the plan pays the full amount below that line.

Does stop-loss insurance fully protect self-funded employers from high-cost claims?

No. Stop-loss reimburses claims above the deductible in the current contract year, but carriers respond to large claims with higher renewal premiums, lasers on individual claimants, or non-renewal. Self-funded employers still carry the cost of high-cost claims over time, which is why reducing severe episodes matters as much as insuring against them.

Can self-funded employers prevent high-cost claims?

Not all of them. Some catastrophic diagnoses are unavoidable, but many severe episodes grow out of care decisions that could have gone differently. Guiding employees to high-performing doctors early, catching warning signs in claims data, and directing care to lower-cost settings all reduce how often a routine episode becomes a catastrophic one.