Report on Stop-Loss Insurance Claims

By July 19, 2018Commentary

In a world in which treatments increasingly can cost hundreds of thousands or millions of dollars, reinsurance or stop-loss coverage becomes essential.  Sun Life is one of the largest providers of such coverage and issues a review of high-cost claims over the period 2014 to 2017.   (Sun Life Report)   During this time frame, Sun Life alone issued $3 billion in reimbursement, which coupled with the underlying payments made by the primary insurer, represented $6.9 billion in total health claim payments.  The top ten conditions accounted for 52% of all stop-loss payments, with cancer being the number one disease and representing 27% of reimbursements.  Other conditions, in order, and the percent of payments, are end-stage renal disease, 5%; congenital anomalies, 4%; transplant, 3.5%; septicemia, 3% and complications of surgical and medical care, 2.6%.  The top five conditions were unchanged from 2016 to 2017.  One notable new condition on the top ten list is hemophilia, likely due to rising costs of medication.  While hemophilia only affects 20,000 people in the US, its average treatment cost of almost $450,000 a year makes it very expensive in aggregate.  Cancer is more prevalent, but has an average cost of “only” $138,500 annually.

Overall, 84% of employers with stop-loss had at least one claim per year, with the highest likelihood being a cancer-related claim, at 69% of employers.  The number of claims, and even the diseases in the top ten list, can change by the deductible level the employer chooses.  Lower deductible levels bring some conditions into play that would not be there with a higher deductible.  One notable item in underlying costs is injectable specialty drugs.  In 2017, these drugs caused $186.3 million in reimbursements and the top 20 injectables were 62% of the total.  Some of these drugs have course-of-treatment claims of several hundred thousand dollars.  Almost all of the high-cost injectables are for cancer treatment.  There is concentration even within this high-cost population of patients with a claim that hits stop-loss.  The number of people with one million dollar plus claims increased 87% between 2014 and 2017 and represented 20% of all payouts.  There were only 643 of these people but their claims totaled over $935 million.  As with other stop-loss claims, cancer is the most reason for million-dollar claims.  The report is a good glimpse into where the growth in health spending is coming from.

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