Employee paychecks further diluted by catastrophic medical and pharmacy (RX) claims over $1 million.
Approximately 20% of the Gross Domestic Product (GDP) spending in the United States is devoted to healthcare; and increasing catastrophic claims costs, specifically over $1 million are a prime reason. Instances of multi-million dollar individual claims have grown at a 30% annual rate since the passage of the Affordable Care Act (ACA) and its mandate for unlimited lifetime benefit limits in health plans. Hospitals and pharmaceutical companies are reaping generous rewards that result from this “unlimited mandate”. The pricing authority now vested in hospitals and pharmaceutical companies is untenable and made worse by their unwillingness to provide any cost transparency to plan sponsors before or after medical events. Prior to the ACA, plan sponsors would cap their annual or lifetime limit; a $1 million per member limit was considered the industry standard.
Industry data reveals that claims over $1 million are primarily comprised of three conditions: Perinatal/Neonatal claims represent 20.7% of all claims and 22.2% of claims spend; Malignant Neoplasms/Cancers represent 20.7% of claims and 20.1% of the claims spend, and; Injury/Poisoning/External Causes, including Burns and Trauma, represent 12.6% of the number of claims and 11.0% of the claim spend.
Opaque provider network contracts impede plan sponsors from their objective of implementing risk reduction initiatives targeted at containing medical claims costs. Networks consider their provider contracts to be “proprietary” despite Employee Retirement Income Security Act (ERISA) provisions deeming claims data ownership to the plan sponsor. Claims detail is restricted by the networks hiding behind unreasoned arguments that make the plan sponsor’s ability to negotiate the cost of care before or after treatment highly difficult and unlikely.
Plan sponsors purchasing stop loss coverage to secure their plan expect claims to be paid. Unbundled stop-loss carriers, those owned independently from the provider networks, have difficulty accurately predicting current or future claims costs without access to appropriate and transparent claims data.
The leveraging impact of medical inflationary trend, which typically outpaces actual Consumer Price Index (CPI) inflation in the United States, is borne by the stop-loss carriers or passed on to plan sponsors. Plan sponsors are left with few choices to absorb increased retention of unpredictable medical costs or pass a portion of the increase to their employees in the form of higher deductibles, coinsurance or increased premium contributions. The impact of medical cost-shifting means employee net (take-home) pay is diluted.
Self-insured plan sponsors know that retaining the predictable (and budgetable) levels of medical claim risk and buying medical stop-loss insurance to transfer unpredictable, and potentially catastrophic, claim risk is the most efficient method for controlling costs. Self-insured employers are uniquely empowered with the ability to design plans that deliver greater transparency and increased control over medical costs. Participation in a group stop loss captive further enhances a self-insured employer’s ability by leveraging the strength of collective membership to capitalize on increased control.
Donald McCully runs Medical Captive Underwriters LLC, (www.medicalcaptive.com). A program management company focused on alternative risk transfer solutions to lower employer’s costs in both accident and health & property and casualty insurance. Primary focus today is employee benefit advisors assisting them to lower medical spend and medical trend for employers enrolled in ClearCaptive. ClearCaptive is a 50 state open, stop-loss captive solution for middle market employers above 50 employees enrolled on the Plan