Large-Claim Trends Continue into 2016

Contributor: PartnerRe Health,
March 21, 2016

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Amid a great deal of publicity, one of America’s largest insurers, announced that it’s considering dropping out of exchanges in 2017 due to losses in excess of $1 billion in that marketplace. What can we learn from this and what does this mean in terms of the financial strain on insurers in general?

We know that exchange trends behave like Commercial or Medicaid trends, and so by taking a look at trends for Commercial and Medicaid we can extrapolate some probably causes across all insurers.

What becomes clear is that the strain results not just from the large number of subscribers to health care plans but also how those subscribers are using their insurance. Perhaps the best example of this change in insurance use is the dramatic increase in high-cost claims.

As data from PartnerRe in Figure 1 shows, the frequency of Commercial large claims continues to escalate at a startling pace.  And as Figures 2 and 3 show, even Medicare and Medicaid large claims are now occurring at a frequency unthinkable just a few years ago.

Figure 1: Trend in Large-Claim Frequency — Commercial

Figure 2: Trend in Large-Claim Frequency — Medicare

Figure 3: Trend in Large-Claim Frequency — Medicaid

In addition to the escalating frequency of high claims, between 2011 and 2015, the severity of neonate claims reached its highest point at $1.6 million, or 26% of all claims by Diagnosis-Related Group (DRG). The severity for “all other” diagnoses — 20% of claims by DRG — ranged from $1.3 million to $1.5 million.

Figure 4: Claim Frequency by Diagnosis Grouping, 2011-15

  • neonate severity highest at $1.6MM
  • severity for other diagnoses $1.3MM-$1.5MM

There’s a great deal of speculation about what’s causing this trend.

One theory is the “boomerang effect” caused by high-deductible plans complicating costs for insurers. According to the PwC Health Research Institute, the prevalence of high-deductible plans has grown nearly 300% since 2009. Employers and consumers choose these plans to keep premiums low, but when even low-cost preventative care (not including wellness checks) isn’t covered, consumers tend to avoid such care because they have to pay for it out of pocket.

The result? Health issues escalate, which causes higher-cost claims in the long run. Delayed diagnoses can also result in increased long-term costs for treating chronic illnesses, including the use of specialty drugs.

In addition, complicated diagnoses make large-claim management increasingly complicated.. For most large claims, it’s not enough to look at a single diagnosis code because with the types of diagnoses involved in high-dollar claims, there are typically multiple co-morbidities and complications that contribute to the overall cost. Each piece of the puzzle must be carefully examined and managed.

PartnerRe can help. Our PULSE + Plus™ Medical Management is an integrated, state-of-the-art program that helps insurers manage health care risk exposure and find solutions for evolving health care challenges.

For more information about how this program’s tools — high-dollar claim review and negotiation, contracting services, network evaluation services, and comprehensive audit and review — can help your business manage high-cost claims, contact the experts at PartnerRe online, by phone at (415) 354-1551, or by email at contactus@partnerre.com.