Catastrophic Claims and Healthcare Costs: Four Things To Know About Catastrophic Health Claims
Catastrophic claims represent a rising portion of the total cost of healthcare in the United States. These claims can be significant loss-points for insurers and reinsurers alike, and are one of the primary drivers of the increasing cost of health insurance nationwide. Here are four things you should know:
They are occurring more often
The frequency of claims in excess of $1 Million has more than doubled since 2004 thanks to the pace of medical advancement and, subsequently, costs associated with effective treatment. Technology and treatment options are currently outpacing cost-mitigating measures.
Furthermore, the Affordable Care Act increased the scope of coverage to include preexisting conditions, but does not include a similarly scoped mechanism with which to leverage down costs or reduce the frequency of catastrophic claims.
They are increasing in severity
The average cost of a catastrophic claim is increasing, partially because of increased cost of treatment, but also because positive health outcomes come at a higher price. For example, transplants now have an average 5 year survival rate well north of 55%, but the average cost of a transplant has risen 12.7% per year since 2004 with no sign of slowing.
Most recently, the advent of Sovaldi has changed the Hepatitis C landscape. FDA approved for use with combination with peg-interferon-alfa and ribavirin or with ribavirin alone in interferon intolerant patients, Sovaldi has an average wholesale price of $1,200/pill. Therapy duration ranges from 12-24 weeks for most patients, exclusive of those awaiting liver transplant. The drug boasts a sustained viral response of eighty percent (80%) which far exceeds earlier therapies but comes with a price that, with reasonable inflation, ranges from $185k-$370k.
Preventive care may eventually decrease the severity of catastrophic claims by heading off catastrophic diagnoses before more expensive treatment options become a necessity, but that remains to be seen.
They are putting strain on insurers
Between increased frequency and increased severity, the costs of healthcare and the strain on insurers and reinsurers are increasing geometrically. More and more, insurers and reinsurers are trying to adopt fixed-fee or per diem arrangements based on diagnoses, rather than pay for treatments in the more conventional way.
Direct writers are leaning more heavily on reinsurers as increased costs place more of a burden on capital reserves, reserves which are needed in a recovering economy. Healthcare payors and administrators are in ever increasing need of cost-controlling measures to ensure effective care while protecting themselves from excessive losses.
The need for expert claim review is more pronounced than ever
With rapidly evolving treatments and runaway costs, insurers, TPAs and reinsurers are relying heavily on expert outside claim reviewers like Advanced Medical Strategies to ensure that healthcare providers are treating their member’s catastrophic diagnoses with the most cost effective, proven treatments available. Constant, expert, diligent review is one of the most effective countermeasures for costs and treatments that are rapidly changing.
At Advanced Medical Strategies, we pride ourselves on the best physician-lead claims auditing in the industry for insurers, TPAs and reinsurers. Talk to us today about controlling the cost of your catastrophic claims while treating your members fairly and effectively.