Younger People Driving More High-Cost Claims For Employers: Survey

Self-insured employers face myriad challenges in trying to manage growing healthcare costs, and one of those results from recent history, according to a survey by the National Alliance of Healthcare Purchaser Coalitions (NAHPC).

“Employers are seeing a rise in high-cost claims for younger plan members, with $1 million+ claims disproportionately weighted toward this demographic,” the NAHPC survey said. “The top conditions for these claims include cancer, prenatal/neonatal care, and treatment for COVID-19/long COVID.”

The NAHPC survey is based on input from the Alabama Employer Health Consortium, the Dallas Fort-Worth Business Group on Health, HealthCareTN and the Nevada Business Group on Health. NAHPC and affiliated organizations represent 45 million Americans who spend over $400 billion annually on healthcare.

The employers’ concerns come from a pre-survey of 39 firms that was conducted in October and November 2022 and a series of roundtables that NAHPC held with 50 employers conducted in November 2022.

Employers also struggle to manage the cost of specialty drugs, some of which have million-dollar price tags. The NAHPC survey warned about the “laser” effect in the stop-loss insurance coverage that they purchase.

Stop-loss insurance protects employers from catastrophic claims that exceed high levels. But these plans can include a cap—or laser—that places a level on just how much of a claim the stop-loss insurer will cover.

“Stop-loss underwriters have the right to laser a claimant, specifically one with a serious, ongoing, expensive medical condition,” the survey said. “The laser puts the cost back on the employer—and it’s becoming increasingly common in response to the elimination of lifetime maximums, advances in medical technology, and the development of high-cost specialty medical drugs.”

Innovative but high-cost therapies are a major driver behind increased healthcare spending, especially in oncology and prenatal/neonatal care.

The authors not only wanted to identify difficulties but also offer possible remedies for them. Employers cited drug prices, high-cost claims and hospital fees as the main causes of concern. They placed the lower limit of a high-cost claim at $100,000, and half of participating employers said they’d been hit with high-cost claims of $2 million to $4 million in the last few years.

Employer priorities over the next couple of years include offering precision medicine for cancer care (45%), launching centers of excellence (39%), negotiating and tracking hospital prices, auditing intermediaries such as pharmacy benefit managers and finding ways to mitigate the occurrence and cost of managing rare diseases (30%).

In the U.S., a disease is considered rare if it affects fewer than 200,000 people, according to the National Institutes of Health. There are 7,000 rare diseases affecting 25 million to 30 million Americans, or 1 in 10 people.

Specialty drugs make up 40% of outpatient prescription revenues, according to the survey, and contribute the most to PBM revenues. There may be help on the way, because specialty drugs could face increasing competition from biosimilars and generic versions, though some of these therapies can also be pricey.

The survey noted that front-loading the cost of specialty drugs increases the financial burden on employers. However, the survey states that “front-loading may be necessary to accelerate the administration of a particular drug that requires high levels immediately to maximize its clinical effects.”

The survey suggested that employers make obtaining second opinions part of routine care in order to cut down on inappropriate care. They also suggest reviewing pharmacy claims through the medical benefit, considering short-term strategies to reduce drug costs and evaluating whether rebate strategies limit or conflict with the adoption of biosimilars.

In addition, the survey mentioned six “rights”: right patient, right price, right drug, right dose, right time and right setting.

When it comes to cancer and prenatal/neonatal care, the increasing costs can be seen as one of the byproducts of the miracle of modern medicine. As the survey notes, mortality rates have been improving considerably thanks to technological advances.

For cancer care, employers should get back to basics through the use of preventive screenings that can identify conditions early when they are most treatable at less expense. Family history needs to be taken into account as well.

“For some at high risk of inherited disease, genetic testing may be appropriate,” the survey stated. “Gather more data to help proactively manage risk by better addressing issues upstream: Use a data warehouse to integrate data and identify issues sooner on both the medical and the pharmacy sides.”

The survey noted that over 380,000 babies are born prematurely each year in the U.S. at a cost of more than $25.2 billion.

“Costs per infant can easily exceed $600,000; premature twins or triplets can multiply costs by up to 300%,” the survey said.

The survey suggested that employers take steps to address patterns that emerge, use a data warehouse to stratify issues, conduct claims reviews to catch NICU cases early, know in advance what health insurers pay and audit hospital billing.

As one survey respondent said: “Don’t let hospitals play ‘catch me if you can.’”


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