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Costliest Claims Put Outsized Burden on Health Plans

Understanding the conditions that lead to catastrophic claims helps employers mitigate their risks

A stethoscope sits on top of money and a calculator.

​​​The number of million-dollar-plus health claims by covered employees continues to escalate, with an increase of 25 percent in 2015 compared to the prior year.

By understanding the conditions that lead to catastrophic claims, employers can better anticipate health benefit costs and take steps to mitigate their risks. Two new reports focus on the challenges posed by high-cost conditions and claimants and highlight effective cost-containment strategies.

Sun Life Financial's fourth annual Top Ten Catastrophic Claims Conditions report, published in July, compiles the costliest medical conditions covered by the firm's stop-loss insurance from 2012 to 2015. Stop-loss insurance protects self-funded employers by limiting the risk associated with catastrophic claims.

Individuals with $1-million-plus claims, who make up less than 2 percent of claimants, account for a disproportionate 18.5 percent of overall stop-loss claims reimbursements. Over the four-year period studied, the average amount paid by an employer on a claim above $1 million was $1.45 million, which was reduced to $491,000 after applying the average stop-loss claim reimbursement ($962,000).

The costliest claims include cancer treatments, heart disease, perinatal and birth-related medical conditions, and blood infections.

Cancer continues to dominate the list of the costliest conditions (No. 1 and No. 2 over the last four years), accounting for more than one-quarter of total stop-loss claims. Of the various types of cancer identified in the report, breast cancer was the costliest, accounting for 13.6 percent of total cancer reimbursements.

Chronic/end-stage renal disease (kidney failure) held steady in the No. 3 spot on the list. Although the average treatment cost for claims associated with kidney disease has gone down 21 percent over the last four years, the high incidence rate of the condition contributes to its ranking. One in three Americans are at risk for kidney disease, with diabetes and hypertension as leading causes. 

​Top 10 Catastrophic Claims Conditio​ns

Percent of total stop-loss claims reimbursements 2012-15
1. Malignant neoplasm (cancer)18.5%
2. Leukemia/lymphoma/multiple myeloma (cancers)8.1%
3. Chronic/end-stage renal disease (kidney failure)6.7%
4. Congenital anomalies (conditions present at birth)4.1%
5. Disorders relating to short gestation and low birth weight (premature birth)3.2%
6. Transplants2.7%
7. Congestive heart failure2.5%
8. Cerebrovascular disease (affecting brain blood vessels)2.5%
9. Pulmonary collapse/respiratory failure (affecting lungs)2.4%
10. Septicemia (infection)2.4%
Source: Sun Life Financial
​The top 10 catastrophic claims conditions represented 53 percent of all stop-loss claims reimbursements, and the top three conditions represented 33 percent.​

Outreach, Education and Interventions

"High-cost claimants" are employees or covered dependents who cost their health plans $50,000 or more a year. Employers are seeking to better understand and mitigate the burden that these claimants put on their health plans, and some help is provided in a new study by the American Health Policy Institute (AHPI), a nonprofit think tank that examines the impact of health policies on large employers.

AHPI's July report, High Cost Claimants: Private vs. Public Sector Approaches, is based on a recent survey of claims data from 26 large U.S. employers. Key findings include:

  • The average high-cost claimant costs $122,382 annually.
  • 1.2 percent of all enrolled plan members are high-cost claimants.
  • High-cost claimants make up 31 percent of total spending.
  • High-cost claimants cost 29.3 times as much as the average health plan member.

In comparison, the researchers analyzed Medicare fee-for-service claims data and found that the average high-cost claimant costs the program $105,004 annually (a lower amount than for employer plans), but that 3.4 percent of Medicare beneficiaries are high-cost claimants (a higher percentage than in employer plans).

"Both the federal government and the private sector need to take a careful look at high-cost claimants," said Tevi Troy, CEO of AHPI. "Employers, for their part, are developing innovative approaches to high-cost claimants and are in a unique position to establish programs that address this group."

Some possible initiatives that employers can take to reduce the cost of high-cost claimants, the report suggests, include:

  • Mining health data to target certain chronic conditions for early and continuing intervention. If they do this well, employers could address chronic conditions early on by helping these employees to better manage their health. That could help reduce claims costs from worsening conditions, while ensuring that these employees get needed care.

  • Engaging beneficiaries to be active plan participants. Employers could offer individual education sessions to explain plan options in detail. Employees who tend to accumulate high-cost claims would especially benefit from this training, and by choosing the right plan, would save money for themselves and their employer.

  • Implementing a wellness program with a clinical orientation. Widely accepted elements of a well-designed wellness plan include developing a multiyear, strategic plan for the program; creating a communications campaign that will inform employees of their health progress and ongoing challenges; and having metrics that allow the employer to evaluate program effectiveness and return on investment.

  • Developing predictive biometric health screening profiles. Health screenings—such as basic measurements of cholesterol and glucose levels, blood pressure, waist circumference, and body mass index—can identify chronic illnesses in their early stages, detect the presence of a chronic disease even when an individual is asymptomatic, and determine what types of interventions or referrals will have the greatest impact.

  • Using care management to target the costs of particular diseases or procedures. Care management incorporates teams of clinicians that connect patients who have chronic conditions and advanced illnesses with the appropriate providers and resources. The care management process begins by identifying which patients are high need.

(For further suggestions on engaging those with chronic conditions using a variety of ​communications, see the​ SHRM Online article Engaging Employees with Chronic Conditions Improves Health Outcomes.)

"To be successful, employers must plan interventions that do not run afoul of regulatory guidelines but that also need no regulatory fix or legislation to be passed," the report advised.


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