Keeping a close eye on emerging claim trends helps health plans, insurers, self-insured employers, and others who are at risk for health care costs anticipate and manage health care spending. Understanding what has been happening in the industry can provide keen insights into what might be coming for high-cost claims over the next few years.
One area that will no doubt influence these trends is COVID-19. We have not yet cycled through the full implications of the pandemic to deduce its affect. Preliminary data for 2020 found a COVID-19 general diagnosis as the eighth highest driver of high-cost claims for the year, representing only 3.2% of all claims exceeding $1 million. However, it is likely that COVID-related claims will rise on this list in the coming years as the long-term effects of pandemic illnesses and treatments cycle through the health care system.
That said, there are numerous high-dollar trends to be aware of overall. The results noted here are based on Risk Strategies internal analysis tracking the reported number of incident rates per 10,000 members since 2016:
Incident rates for claims from $500,000 to $750,000 have seen a 25% increase overall from 2016-2020.
Claims in excess of $1 million continue to rise. Incident rates have risen in this category by 34% from 2016-2020, representing a 64% increase in excess costs during this period.
We have seen an especially sharp rise in claims over $3 million. Incident rates in this category have risen by 290% from 2016-2020, an average of 40.52% per year. From 2019 to 2020, the incident rate nearly tripled.
Inside the numbers, these were the medical conditions driving high-cost claims:
The top 5 diagnoses for $1 million to $2 million claims in 2020 were neonatal care (inclusive of premature birth and congenital anomalies), cardiac disease, blood disease, cancer and respiratory disease. This list has remained consistent over the past five years.
Those same diagnoses also topped the list of causes for claims from $2 million to $3 million in 2020, but with nervous system disorders displacing cancer.
Neonatal care was the top general diagnosis for claims from $1 million to $2 million, representing 21.7% of those claims in 2020. Neonatal care has consistently been at or near the top of this list each year since 2016.
Preliminary analysis for 2021 shows a sharp rise in circulatory disease as a diagnosis for $1 million to $2 million claims. However, this data is still being compiled, so this cannot be conclusively labeled as the top driver in this category.
For claims exceeding $3 million, the top diagnosis in 2020 was heart conditions, specifically cardiogenic shock. The diagnoses in this category have varied somewhat in the period from 2016-2020, though neonatal claims have made the list three times in those five years.
Among the key trends to track moving forward are the rising use of cell and gene therapy, as well as high-cost specialty drugs. These are often embedded in other diagnoses, such as cancer, but will be big drivers of cost in the future.
Unsurprisingly, the frequency and total dollars of high-cost claims continues to rise year over year. Beyond that, it becomes difficult to talk about “average costs” with absolute certainty, as there can be a vast range of variables, including costs, within any one claim category.
While individual drivers can change, one thing is clear: the increase in excess costs for claims ranging from $500,000 to $3 million has grown by 18.3% across the board over the past five years. The best practice remains to work closely with a Reinsurance expert to assure proper risk mitigation and transfer in a predictably volatile market.
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The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.