What your self-funded plan should know about high value claims

High value claims:  Not “if” but “when”

1 in 2 Americans has at least one chronic health condition, 1 in 4 has two or more.  And 75%+ of healthcare spending is for chronic conditions.  (1)

“For most employers, experts say the prospect of incurring a catastrophic health care claim is not a question of “if,” but rather “when,” given the rate at which the frequency of high-cost claims has increased during recent years.” (2)

Reviewing the most recently available data provided by Highmark Inc., over a four year period from 2008-2012 the number of $500,000 claims has increased by 63% (from 16.5 to 27 claim incidents per 100,000 employees) and the number of $750,000 claims has increased by 96% (from 5 to 9.8 claim incidents per 100,000 employees).  There are four diagnosis categories that have consistently been the most expensive on this claim range:  cancer, heart disease, trauma, neonatal, and renal.

Number of $1,000,000+ Claims has doubled in just 4 years

Included in the report  from Highmark Inc., the activity for claims costing over $1,000,000 has doubled in the four years from 2008 to 2012.  In 2008 the claim incidence per 100,000 employees was 2.1 for claims exceeding $1,000,000.  In 2012, the most recent data available, that number increased to 4.2 claim incidence per 100,000 employees. 

What is causing the change in claim values?

This drastic escalation in high value claims is due to a proliferation of the use of various new and existing high-cost medical treatments.  The top diagnosis categories for these $1mill + claims include cancer, heart disease, neonatal intensive care, and trauma, such as motor vehicle accidents.

The costs driving these diagnoses are:  cancer treating drugs(including specialized and experimental treatments); complications from multiple births; complications from transplants such as rejection; comorbid conditions such as diabetes, obesity, uncontrolled hypertension; and renal failure.  Infections such as septicemia or sepsis can also lead to high cost claims.

What should I do to protect my plan from high value claims?

Given this trend of escalating frequency of high value claims, your self-funded organization should consider monitoring the diagnosis of your high cost claims to look for trends in both the medical and pharmacy costs.  Your organization should also consider purchasing stop loss insurance to protect itself  from catastrophic claims.

 

(1)    Kleiner Perkins Caufield Byers, Internet Trends Report – Code Conference.  Mary Meeker, May 28, 2014.   http://www.kpcb.com/internettrends

(2)    Business Insurance Magazine:  Health reform law’s cap on limits may prompt rise in medical stop-loss cover, May 25, 2014 http://www.businessinsurance.com/article/20140525/NEWS03/305259995