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Additional Reports from Secondary Payers

By July 10, 2024Commentary

Your employer’s self-funded or insured plan, or your Medicare Advantage plan are examples of primary payers.  They pay the claims for health care services as they come in.  But almost all of these payers are fearful of the impact of very high-dollar claims, particularly multiple high-dollar claims.  So they buy protection in the form of “stop-loss” insurance for a self-funded plan or reinsurance for an insured health plan or MA plan.  Those secondary coverages typically cover individual claims above a certain amount or total claims over a threshhold.  The bigger the population covered by the plan, the higher the threshhold typically is.  So a small self-funded employer may have a claim limit of $50,000 whereas for a very large one it could be $500,000 or more.  The liability retained by the primary payor is referred to as a deductible.

Watching the nature and amount of these secondary payer claims can help us understand broader trends in health care spending.  Two new reports help with that understanding.  One comes from HCC, a very large stop-loss coverage provider.  The HCC report gives you an excellent insider’s understanding of how stop-loss insurance works.  HCC reports an increase in both the number and size of very large claims, including many over $1 or $2 million.  The likelihood that even a small self-funded employer will have a large claim has risen dramatically and for larger employers it is a virtual certainty.  Cancers and heart disease are leading causes of large claims, but young children are increasingly a source, due to gene therapies for rare conditions.  Transplants have always been a source of large claims and the number continues to grow.  The remainder of the report describes techniques used to help control the cost of complex cases and keep stop-loss premiums at a reasonable level.   (HCC Report)

The second report comes from QBE.  According to this report the largest disease categories contributing to stop-loss claims are cancer, heart disease, respiratory conditions and premature babies.  These high cost conditions have been fairly stable for several years.   The conditions responsible for claim can vary by deductible level, with certain conditions predominating more at higher deductible levels.  Specialty drugs are one primary cause of the increased costs of treating cancer cases.  While the cost of treatments has risen for many of these high-cost diseases, so has the frequency of certain claims, particularly those relating to drug and alcohol abuse.     (QBE Report)

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