Most health plans and most employers who self-fund health benefits use reinsurance or stop-loss coverage to protect themselves in the event of a single very large claim or total costs that exceed their actuarial projections. So what kind of claims lead to these cost over-runs and payouts by the stop-loss carriers or reinsurers? Sun Life is a large stop-loss provider and has issued the latest in a series of reports on high-cost claims. (SL Report)
Some highlights are that 21% of all employers had a covered person with a million dollar plus claim, from 2020 to 2021 there was a 19% increase in million dollar claims, 70% of all claims that hit stop-loss levels are from the top ten conditions and mental health and behavioral claims are increasing rapidly. Cancer is the number 1 and 2 category for high cost claims, boosted by the cost of specialty drugs. Third is cardiovascular care, followed by orthopedics and pre-term or seriously ill infants.
Hemophilia has the highest average annual cost at over $330,000, 84% of which is for drugs. Newborns have the second highest average cost, at around $318,000, almost all of which is medical cost. There is an interesting and wide variation in conditions which have high medical versus drug costs. In the last two decades, however, drugs have become the source of the majority of growth in costs.