The Illusion of Last Year’s Data

In the October 2025 issue of The Self-Insurer, Bruce Shutan’s article, “Fielding Catastrophic Curveballs”, spotlights a reality the stop-loss market can’t ignore: catastrophic claims are multiplying at an unprecedented pace. Seven-figure claims are no longer anomalies – they’re shaping the economics of self-funded health plans and stop-loss underwriting.

But here’s the deeper issue: these trends aren’t simply about bigger claims. They’re about blind spots in the way we see risk.

When Catastrophic Claims Become Commonplace 

Too often, underwriting still looks like a rearview mirror. Last year’s large claims get modeled into next year’s rates, while the rest of the population is treated as a blur of averages. That approach may have worked a decade ago, when million-dollar claims were rarities. But when $2M+ claims have increased more than twelvefold since the ACA eliminated lifetime caps, averages are no longer protective. They’re dangerous.

The Unseen Majority

What’s most striking is that at the time of underwriting, only 2–5% of a group’s population is visible through large claim reporting. That means 95%+ of members are essentially “mystery claimants.” And it’s often within that unseen majority where tomorrow’s catastrophic events are hiding, from undiagnosed cancer, uncontrolled metabolic disease, or the early warning signs of conditions that don’t surface until it’s too late.

Why Predictive Precision Is the Next Frontier

At Merit Medicine, we see the future of underwriting not as bigger stop-loss margins, but as better foresight. By digging into multi-year clinical, pharmacy, and claims data at the member level, we can illuminate risks that standard reports miss:

• Members whose treatment patterns signal worsening conditions.

• Emerging exposure to specialty drugs and gene therapies.

• Comorbidities that compound into outsized financial impact.

This isn’t just about pricing groups more accurately, it’s about stabilizing renewals, bending the cost curve, and making stop-loss more sustainable in an era of volatility.

A Call to Rethink Risk

Shutan’s article makes clear that catastrophic claims are rising faster than carriers and MGUs can adapt. Our view is that the only way forward is shifting from reactive underwriting to predictive precision. Without it, the industry risks entering a cycle of volatility: underpricing groups, getting hit by unexpected claims, then swinging the pendulum too far on renewals.

Employers, brokers, and carriers deserve better than lurching from crisis to crisis. Predictive analytics offers the chance to break the cycle, to make risk transparent, manageable, and aligned with sustainable stop-loss pricing.

At Merit Medicine, we believe the winners in the next decade of self-funding will be those who don’t just field catastrophic curveballs, they anticipate them before the pitch is thrown.

You can read the full article by Bruce Shutan in The Self-Insurer (October 2025 issue, pp. 48-52).