High-cost Claims Threaten Affordability of Employer Healthcare Coverage

Healthcare benefits are a crucial part of any employment package, attracting quality employees while providing valuable access to medical care and services.   

Employers face multiple challenges in managing  the rising healthcare costs.  In specific, high-cost claims have been spiraling in recent years, particularly for people with specialty therapies.  

Most employers don’t have the resources to address these high-cost claims as shown in a recent survey from the National Alliance of Healthcare Purchaser Coalitions (NAHPC).  This surge of high-cost drug claims is considered one of the biggest threats to employer-sponsored healthcare coverage today. 

Key Points

• Claims of $3M or more for individual plan members have doubled since 2016.  
• The Affordable Care Act eliminated annual and lifetime maximums, resulting in more high-cost claims of millions of dollars for a single individual.  
• Nearly 8 in 10 employers consider drug prices, high-cost claims, and hospital prices to be significant threats to the affordability of employer-provided health coverage.

Key Cost Drivers

The 2022 NAHPC High-Cost Claims Initiative included surveys, calls, and regional breakout meetings focusing on employer perspectives on high-cost claims issues and possible strategies to lower costs without compromising patient care. 

Some employers confessed that high-cost claims have been “keeping them up at night.”

Out-of-pocket maximums set by most employers range from $3,000 or below (34%) to $3,000-$5,000 (42%).  About 20% set out-of-pocket maximums of $6,000 or more. 

What is a high-cost claim?

High-cost claims are over $50,000 but often spike to $2-$4M.  

Only 1.2% of all health plan members are high-cost claimants, they make up 1/3 of total health care spending. 

“High-cost claims are the biggest threat to healthcare coverage today. Only through collective employer action can these risks be mitigated”, warns Michael Thompson, President and CEO of the National Alliance of Healthcare Purchaser Coalitions. 

Younger People and High-Cost Claims

High-cost claims of over $1M for younger plan members are on the rise.   The biggest areas identified for these members were: 

• Cancer treatments
• Prenatal/neonatal care
• COVID-19/long COVID

Other high-cost treatments are specialty drugs and gene therapies, both of which can cost millions. Analysis by the Institute for Clinical and Economic Review (ICER) puts the average cost of a gene therapy between $1 million and $2 million per dose.

Recommendation- Start with the Basics

The miracle of modern medicine has produced innovative therapies that are also very expensive.  

To manage these costs, the survey highlights four basic “rights” for patient care: right diagnosis, right treatment, right place of care, and right billing codes.

One recommendation calls for second opinions because some high-cost claims are based on incorrect diagnoses.

Cancer and Neonatal Care

For cancer care, early screening/intervention is recommended so that the disease can be treated in the earliest stages when it is most treatable.  Also, in-home treatments which bring more patient satisfaction and efficacy could save thousands. 

For neonatal care, recommendations include verifying NICU patient cases to be sure that this high-level, high-cost care is necessary. Also, recommended is auditing hospital billing, to confirm all charges are appropriate (“Don’t let hospitals play ‘catch me if you can,’” noted one participant).

Specialty Drugs and Rare Disease Therapies

Employers are concerned about the ongoing cost increases for specialty drugs and gene therapy. 

In the US, a disease is considered rare if it affects fewer than 200,000 Americans. According to the National Institutes of Health, there are approximately 7,000 rare diseases, affecting 25–30 million Americans or one in 10 people.

Survey recommendations include making second opinions standard to confirm the diagnosis, reviewing pharmacy claims that are run through medical benefits and following the “six rights”: right patient, right drug, right price, right time, right dose, and right care setting.  

Future Plans

The National Alliance is using the survey results to create a best practice playbook to help  HR professionals handle these escalating costs of claims so that employer-sponsored benefit programs can stay strong. 

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