We all know health care costs are on the rise, and employers know that it will just keep getting worse in the future. Looking at the data, dramatic rises in high-cost health claims are to blame. A logical guess might lead us to look at the older populations or those with rare conditions, but some detective work proves that younger employees are the ones to blame for these increases. How can agents help their groups reduce these high costs?
To be considered high cost, a claim generally must reach the $100,000 mark. Some employers will keep an eye out for $50,000 claims, as they are a bad omen of higher claims to come. To further compound the issue, the Affordable Care Act (ACA) puts a kibosh on lifetime limits, so no relief is in sight for an employer with a chronic high claim creator. But how often does this occur, really? More often than you might think. Half of all employers have experienced claims between $2-4 million dollars in recent years. Claims reaching $1 million or more are disproportionately focused on millennials and Gen Z. Of the total number of members on a group plan, only 1.2% are generating these high-cost claims on average, but high-cost claims are responsible for 33% of the spending.
These claims are just as often preventable or manageable as they are inevitable. The top three contenders are cancer, neonatal/prenatal care, and complications arising from long-COVID or the treatment of COVID symptoms. While all of these conditions reasonably should have some care associated with them, most high-cost claims stem from a lack of preventative care, making the situation go from bad to worse both health and cost-wise.
This care is generally welcome in the older demographics but shied away from by the younger crowd. Citing cost as a factor, 36% of Americans 18-34 have avoided medical treatment in the past year. Only 14% of those 55 and older did the same.
Those statistics must be comprised of mostly uninsured people, you might hypothesize. Coverage in the group market, theoretically, prevents high-cost claim spirals at the source. The Affordable Care Act, with its ten essential health benefits, would ensure that the care these members need is available to them.
While this is true on the surface, statistics don’t seem to shake out that way. Of those eschewing medical care in the last year, 28% were the primary member on their employer plan, and 33% were covered by a family member’s employer. Turns out having essential health benefits doesn’t always mean free to the consumer, it just means that insurance covers a portion. In other words, people have coverage – but they don’t think that coverage makes preventive care affordable. That’s more likely to result in high-cost claims.
So let’s put these two data points together. While cancer, prenatal care, and COVID almost always require medical attention, putting off the diagnoses or treatment of these conditions results in can lead to major, life-threatening emergencies. And we all know what that translates to in the billing department, coverage status notwithstanding.
Employers try their best not to pass much of the costs on to their employees, but they aren’t always sure of how to do that. Employers report that drug and hospital prices paired with high-cost claims are the most threatening to their affordability. While there are many different ways to manage these costs, some are proving to be more effective than others.
Large employers can turn to pharmacy benefit managers, who work with pharmacies to negotiate drug prices and accessibility, for help. Another avenue, a third-party administrator (TPA), is also an option. These administrators specialize in collaborating between companies and the medical industry to find the most cost savings possible. These can be helpful, and some reports find these are the most frequent option used by employers. Small and medium-sized groups might find these cost prohibitive.
Another option would be stop-loss coverage. This type of insurance allows employers to better predict their healthcare costs by setting a cap on out-of-pocket costs. Any amount beyond the cap is paid by the stop-loss policy. But some risk does come with the coverage: many of these plans have caveats surrounding certain classes of claims. Employers can’t predict what types of claims will send them into the throes of high costs, so some are just forgoing stop loss altogether. Others cite the high price tag as a reason to skip out.
Other, lower commitment options might be on the table as well. Offering screenings for high-cost culprits, such as cancer, can help attain earlier diagnoses and soften the cost blow. Making vaccines easy for employees to obtain might keep some long-COVID symptoms from ever starting. And of course, encouraging employees to take preemptive steps regarding their health is always a good option overall.
It’s tough to say. Are younger adults eventually going to be able to put their health first? Are these issues just going to keep compounding as the young bucks become oldies? The first line of defense in helping employers lower costs remains the same: switching plans, hiking deductibles, jumping metal tiers, adding CDH accounts…But agents can have a list of solutions in their back pocket to help out in other ways when employers aren’t willing to pass the cost on to their employees or sacrifice richer benefits.