No-New-Laser Protections: Balancing Stability and Underwriting Risk in Today’s Medical Stop Loss Reinsurance Market
By Chris Chirico, Senior Underwriter, US Healthcare Reinsurance
No-new-laser (NNL) protections have become an increasingly common feature in today’s stop loss market, helping employers manage renewal volatility and budget for healthcare costs more predictably. However, as healthcare claims grow larger, more severe, and less predictable, broader use of NNL provisions raises an important question: are we improving stability or reducing the underwriting flexibility needed to manage emerging risk? While NNL protections remain a valuable tool, their long-term sustainability depends on applying them thoughtfully, pricing them appropriately, and ensuring they remain aligned with the underlying risk.
Why are No-New-Laser Protections Becoming More Common?
Healthcare spending is highly concentrated among a relatively small number of claimants. According to the Employee Benefit Research Institute, the top 1% of individuals with employer-sponsored health coverage account for approximately 28% of total healthcare spending, while the top 5% account for 56%.1
At the same time, advances in medical treatment, specialty pharmaceuticals and complex care are increasing the financial impact of high-cost claimants. As a result, relatively few individuals can have a disproportionate effect on plan performance and renewal outcomes.
These claims are also increasingly difficult to predict. According to Lockton’s High Cost Claimant 2025 Report, only 21% of high-cost claimants remain high-cost claimants across two consecutive years.2
That matters from an underwriting perspective. When severe claims emerge more frequently and less predictably, preserving underwriting flexibility becomes increasingly important.
When a Protection Becomes an Expectation
NNL protections were designed to protect employers from unexpected renewal shocks by limiting an insurer's ability to laser a known claimant or materially change renewal terms.
In a more volatile market, it is easy to understand why these protections have become attractive. Over time; however, many employers, brokers, and carriers have begun treating them as a standard feature rather than a targeted enhancement.
In our experience, it is not unusual today to review submissions where more than half of the business has been sold with an NNL rider attached.
That raises an important question: if volatility is increasing and the financial consequences of a single claimant are becoming more severe, should underwriting flexibility routinely be reduced?
In some cases, NNL protection is no longer being evaluated in underwriting decisions. It is being treated as a baseline expectation regardless of group size, premium adequacy, or claims credibility. Are we responding to increased volatility with greater discipline, or simply with more protection?
Are No-New-Laser Provisions Sustainable in Today’s Stop Loss Market?
Stability has value, but it also has a cost.
No employer wants to face an unexpected laser at renewal. However, risk transfer only works when the economics remain sustainable for the parties providing that protection.
Every time a reinsurer limits its future underwriting options, it accepts additional uncertainty. That may be appropriate, but only when premium, experience, attachment point, and exposure support the commitment being made.
In theory, these commitments can be reflected in pricing. In practice, competitive market pressures do not always allow actuarially indicated pricing to be fully achieved. As a result, the economics supporting NNL protections can become increasingly difficult to sustain over time.
Consider a simple example. If a group generates $300,000 in premium and 25% is consumed by taxes, fees, and administrative expenses, only $225,000 remains available to pay claims. If renewal increases are capped at 50%, only an additional $112,500 can be applied in claims cost increases for the renewal plan year.
Viewed against current healthcare costs, the margin for error quickly narrows. As an illustration, cancer related medical service costs for a single patient can exceed $45,000 in the first year after diagnosis and more than $120,000 in the final year of life.3
NNL protections are not inherently problematic. However, the financial assumptions supporting them must remain realistic.
Is the Market Started to Push Back?
One of the more notable recent developments is that NNL protections are no longer being treated as automatically renewable in every situation. The market is becoming more willing to ask whether the underlying risk still supports the commitment being made at renewal.
Reinsurers are naturally more cautious when:
- Group size is small
- Premium volume is limited
- Claims experience lacks credibility
- Enrollment is unstable
- Data quality is insufficient
In these situations, guaranteeing future terms can be difficult to actuarially justify.
The market is not pushing back against NNLs. It is pushing back against the assumption that NNLs should apply in every situation regardless of risk profile.
Avoiding the Next Overcorrection
No-new-laser protections remain a valuable tool. But good underwriting requires distinguishing between what is valuable and what is appropriate.
Equally, indiscriminate use of lasers would represent its own form of overcorrection. The goal is not to maximize certainty or flexibility. It is to maintain the balance between them.
As claims become more severe, more frequent, and less predictable, the answer cannot simply be more protection everywhere.
2 https://lockbox.lockton.com/m/384b2007ed4bb5a0/original/High-Cost-Claimant-2025-Report.pdf
3 Mariotto AB, Enewold L, Zhao J, et al. Medical Care Costs Associated with Cancer Survivorship in the United States. National Cancer Institute, Cancer Trends Progress Report. Available at: https://progressreport.cancer.gov/after/economic_burden. Accessed August 2026.
