The medical stop-loss market remains challenging.

Karin James, an assistant vice president in the U.S. stop-loss operations at Sun Life Financial Inc., Toronto (NYSE:TSX), gave that assessment during a recent interview.

The Patient Protection and Affordable Care Act of 2010 (PPACA) has increased interest in stop-loss and created opportunities, but “it’s a very tough market,” James says. “Very competitive.”

A stop-loss plan is a kind of insurance plan for an insurance plan. Self-insured employers use stop-loss programs to protect the plans against catastrophic losses.

The authors of PPACA have caused employers to give self-funding and stop-loss a new look by exempting self-funded plans from many of the new PPACA mandates.

Other provisions have increased interest in stop-loss by eliminating major medical plans’ — including self-funded plans’ — ability to apply lifetime benefits limits and phasing out their ability to apply annual benefits caps.

In the past, many large employers used their large size and annual benefits limits, such as $1 million caps, to manage claims risk. They did not feel they had to buy stop-loss.

Now, the restrictions on benefits limits are changing some employers’ views about stop-loss.

James has heard of an $8 million claim for one individual, and she personally sees $2 million and $3 million claims.

The phaseout on benefits limits and the risk of expensive claims has “opened up another market segment for us,” James says.

But barriers to entry are low, and new managing general underwriters are trying to get attention with aggressive pricing, James says.

Sun Life is trying to price for the long-term and appeal to customers that are looking at more than price, James says.

Cigna Corp., Bloomfield, Conn. (NYSE:CI), recently made one of the stop-loss carriers that serves a program that rents the Cigna provider network to self-funded plans through third-party administrators (TPA), and James she believes Cigna chose Sun Life because it wants self-funded plans and TPA using its provider network to be working with solid stop-loss suppliers.

Similarly, solid stop-loss sellers want to work with solid TPAs, because employers that are starting to self-fund need to understand how different self-funding is from buying ordinary health insurance, James says.

“There are a lot of pieces that now become the responsibility of the employer,” James says.