Nov 2, 2015 - Not surprisingly, the most costly claims involve deadly ... organ and bone marrow-stem cell transplants ..
Avoiding
Catastrophe How to Manage Skyrocketing $1 Million-plus Medical Claims without Health Benefit Caps and in Response to Rising Costs
W
ith Corporate America fretting about the unintended consequences of health care reform and lobbying for relief on Capitol Hill, a recent report raised eyebrows about a troubling trend that appears to have been exacerbated by the Affordable Care Act. At issue is how the end of lifetime and annual health benefit caps in 2014 for 105 million working Americans with group health insurance coverage as mandated by the ACA has played a significant role in spiking catastrophic health care claims. In its second annual stop-loss catastrophic claims report, Sun Life found that the number of stop-loss reimbursements that were individually $1 million or higher skyrocketed by 1,000% between 2010 and 2013, while the number within that final year rose sharply by 144%. Claims exceeding $2 million more than doubled during that time, according to the research. Written by Bruce Shutan 4
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AVOIDING CATASTROPHE | FEATURE In addition, the number of health care claimants with annual claims exceeding $1 million soared 68%, while those over $2 million more than doubled during that same four-year stretch. “The removal of annual and lifetime limits on payouts has resulted in greater catastrophic risk exposure for many self-funded employers that previously had a cap in place,” explains Brad Nieland, VP of stop-Loss for Sun Life. Aside from the ACA, he says two other fundamental drivers of these claims include hospital bills continuing to increase at a rate higher than general inflation and advances in medical technology that have opened the floodgates to more costly procedures. “About 10 years ago or so, we didn’t see $1 million-plus claims,” observes Lisa Hawker, who heads up the employee benefits operation at Hylant, one of the nation’s largest privately owned insurance brokerage firms. “Today, we’re seeing them all the time.” Without benefit caps, employerprovided health plans are now entering “the beginning phase” of “an incredible pain point, long-term,” laments Dwight Mankin, president of Communitas, Inc., an AmWINS Group Company. He says many employers are finding that 5% of their covered lives are driving nearly half their costs.
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Medical Breakthroughs Not surprisingly, the most costly claims involve deadly or serious illnesses. More than half the $2 billion in claims that Sun Life reimbursed to stop-loss policyholders between 2010 and 2013 were tied to 10 costly conditions. Most of those claims were traced to malignant forms of cancer care ($347.9 million, or 17.5%) followed by end-stage kidney failure or renal disease ($164.3 million, or 8.2%) and other forms of cancer involving
leukemia, lymphoma and myelomas ($159 million, or 8%). Other big-ticket items included birth defects and premature births; organ and bone marrow-stem cell transplants; specialty drugs to manage various chronic conditions. In addition, the report noted that claims occurring less frequently, such as transplants and hemophilia or bleeding disorders, actually resulted in higher overall costs in the self-funded market. “When we look at the bone marrow and stem cell transplantation that’s occurred, we saw a 177% increase from our 2011- 2012 reporting to our 2013 and 2014 reporting,” reports Lisa Hundertmark, senior manager of claims services and clinical resources at Sun Life. She says the area is ripe for expansion, moving beyond leukemia and blood disorders to include ovarian, breast and testicular cancers, sickle cell anemia and other illnesses. One factor is that between advances in medical procedures that have reduced the toxicity to transplant patients and accompanying medications or suppressors, the range of potential transplant candidates is now much broader than before. The speed with which medical breakthroughs are being tested serves as a backdrop to the megaclaims trend. For example, the number of clinical trials on the books soared to 18,237 as of August 2015 from 1,854 in 2009, according to www.clinicaltrials.gov. “It kind of speaks very well to the fact that medicine is really evolving at a really fast clip and that because of that, treatments are becoming available to people that weren’t available in the past,” Hundertmark notes, a trend that’s expected to continue. She recommends that employers and their health benefit advisers monitor
these developments to anticipate new treatments and educate the marketplace “so that they know what to plan for.”
Impact on Stop-loss Industry experts say that an increase in $1 million-plus health insurance claims spotlights the need for stop-loss and reinsurance coverage, including options for nolaser contracts that exempt carriers from having to pay costly outstanding claimants, which Hawker says will help manage group renewals in the selfinsured market. It’s not surprising that these skyrocketing claims have made service providers a bit more conservative in their underwriting practices. She thinks they also need to be more concerned about capacity “because they’re potentially on the hook for significantly more dollars than they have been in the past... Most of the stop-loss carriers we work with are offering contracts that mirror what’s required in the summary plan description of no lifetime maximums.” With $1 million-plus claims now more commonplace, Mankin expects stop-loss premiums will rise to prepare for many of more of these occurrences in an age of open checkbooks that requires greater stewardship and responsibility. But it also may be the price self-funded employers must pay for peace of mind. He says having the right stop-loss coverage in place should help them feel confident that they’ll be financially protected if and when a very large claim occurs. One major challenge will be using population health strategies and data analytics to pinpoint individuals who are driving huge catastrophic claims, along with wellness and disease management programs, according November 2015 | The Self-Insurer
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AVOIDING CATASTROPHE | FEATURE to Mankin. Another important approach involves pharmacy benefits management to manage escalating costs associated with specialty drugs whose treatments he says may range from $50,000 to $100,000.
to ensure that the most cost-effective and appropriate medical services are being rendered. For example, she says an X-ray might do just fine in certain cases instead of a significantly more expensive MRI. That effort also could include transplant carve outs or more aggressive managing of costly dialysis claims, as well as closer scrutiny of third-party administrators or other partners when it comes to examining medical necessity.
Additionally, on-site medical reviews by an independent party rather than passive telephonic interventions will help self-insured employers get a better handle on these costs, he suggests. This process will help determine whether care is being rendered in the right setting for a more cost-effective outcome.
By the same token, it also can help remove any suspicions about performance. For example, Nieland believes “it’s more important now than ever for the employer, broker, administrator and stop-loss carrier to work collaboratively to manage the risk of very large catastrophic claims.” By doing so and developing best practices, he says it will produce the best possible health and cost outcomes for claimants and employers alike.
Mankin says hospitals must be more mindful about discharging patients prematurely, since they can be penalized for readmitting individuals on Medicare within 30 days of their hospital stay. Another worry is the effect hospital consolidation could have on managing mega-claims.
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The upshot will be a need for better on-site intervention at hospitals, as well as coordination between primary care and community resources, especially he says on the workers’ comp side to help facilitate a return to work. This trend also could give rise to more value-based purchasing or reference-based pricing, Mankin believes, not to mention telemedicine to reduce unnecessary ER visits and mobile apps to help individuals monitor their own health. “If we can get in front of some of those things, we can start preventing some of these catastrophic issues that occur because of somebody not taking care of themselves,” he says.
Indeed, a new era may be dawning for managing the costliest group medical claims. The significant growth of $1 million-plus catastrophic claims inspired Sun Life to spread industry awareness about this phenomenon through a special annual report that seeks to provide credible information, encourage collaboration among service providers and make recommendations for employers, according to Hundertmark.
“I have a team of nurses who will do outreach to administrators to talk about particular claims as the notices come in about diagnoses that we know that we might be able to support with cost containment,” she explains. The danger of sobering headlines about such high health insurance claims is they can give a mistaken perception that self-insurance is somehow no longer a viable option, cautions Karin James, assistant VP of strategic operations for Sun Life’s stop-loss business. However, she says this phenomenon has created greater awareness about the cost of health care and the need for more transparent data, which provides an opportunity to proactively manage claims. In spite of the rise in $1 million-plus claims, Hundertmark sees more employers considering self-insurance than ever before. ■ Bruce Shutan is a Los Angeles freelance writer who has closely covered the employee benefits industry for more than 25 years.
Hawker recommends that selffunded employers have strong specialty pharmacy contracts in place to control the cost of emerging injectable drugs and other costly medications to manage chronic conditions. Other areas include medical management and utilization review November 2015 | The Self-Insurer
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