The Impact of Catastrophic Claims  (Plan on Continuing Rate Increases)

 The Affordable Care Act did anything but make health care and health insurance more affordable.  The law that was supposed to drive costs down actually did the exact opposite……………………….

The Impact of Catastrophic Claims   (plan on continuing rate increases)

By Dan Meylan  – National Sales Director, Allied National

The Affordable Care Act did anything but make health care and health insurance more affordable.  The law that was supposed to drive costs down actually did the exact opposite.  The political system failed our citizens and our country. Our politicians and regulators have yet to step to the table with any relevant solutions. As we project the cost of health care based on the increases since ACA took effect, health care costs for an American Family of 4 will exceed $33,000 by the year 2022 and represent for than 20% of the GDP of the United States.

There were many ‘enhancements” under the ACA that caused the increased costs but probably the most impactful was the elimination of the “life time maximum” present in most policies prior to the ACA.  One of the leading stop loss carries, Sun Life Financial, published their 5th Annual Stop Loss Research Report which closely examines the increase costs associated with the addition of the “unlimited lifetime maximum”.  Here are the highlights of the Sun Life Study. Keep in mind this is just one stop loss carrier representing a small slice of the health care financing universe and the driver for these results is the out of control increasing cost of health care.

  • Ø      Time period covered 2013 to 2016
  • Ø      Stop Loss Claims Paid – $2.7B
  • Ø      Total Claims Paid – $6.1B
  • Ø      Employer Size 50 to 100,000+
  • Ø      In 2016 $1,000,000+ claims increased 26% from 2015
  • Ø      $1,000,000+ claims accounted for 23% of all stop loss claims
  • Ø      Cancer is the top cause on $1,000,000+ claims
  • Ø      78% increase of employers with a transplant claim from 2008 to 2015
  • Ø      68% increase in 1,000,000+ claims from 2013 to 2016
  • Ø      2.2% of all claimants accounted for 23% of all stop loss payments in 2016
  • Ø      In 2009 17% of all group plans had unlimited lifetime maximums
  • Ø      In 2016 99% of all group plans had unlimited lifetime maximums
  • Ø      57% of all $1,000,000 claimants were under age 20
  • Ø      39% of all $1,000,000 claimants were under age 2
  • Ø      48% of all paid charges to the top 5 $1,000,000+ claimants were attributed to intravenous medications
  • Ø      The average employer payment before stop loss reimbursements on $1,000,000+ claims was $502,000These results pose some demanding questions:
  1. What will these figures look like 5 years from now, 10 years from now?
  2. How will these costs impact future fully insured and stop loss premiums?
  3. What would these claims costs have been had without unlimited lifetime maximums?
  4. What would happen if limited lifetime maximums were reinstated at $1,000,000 with the condition that individuals and groups could elect to purchase higher limits if they desired to do so.
  5. Do our politicians have the political will to reinstate limited lifetime maximums?There are multiple grass roots movements promoting various health care cost savings strategies such as wellness, reference based pricing, direct primary care, better price transparency, cost controls on medications and others. Allied National is actively engaging with all these great initiatives. But until there is some cap on these extraordinary large claims, insurance, reinsurance and stop loss carriers have no choice but to continue to increase their rates to allow for this massive potential exposure to loss.

Daniel R. Meylan

National Sales Director

Direct Line 913-945-4253

Fax 913-945-4396

Cell 719-338-6466

dmeylan@alliednational.com

 

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