Biotechnology Healthcare - November/December 2008 - (Page 31) MAKING THE CASE FOR Biotechnology Reinsurance (BIO-RE) The inherent difficulty of sustaining the rate of growth in healthcare spending may make biologics a touchstone for government intervention. The author proposes a combined cost-management and care-delivery standard that could lessen that threat. BY BRUCE PYENSON, FSA, MAAA T oday’s cost crisis in healthcare hurts the people who need expensive technologies as part of their therapies as well as those who pay. The cost crisis also is leading to a new “comparative value” paradigm for companies that market high-cost technologies. Critics of our healthcare system point out that, over the decades, health insurance has changed from a vehicle for bearing risk for unpredictable events — the traditional role of insurance — to one that largely manages paperwork and shifts costs. Emerging high-priced treatments, including advanced biotechnology regimens, are restoring risk to the forefront of costsaving concerns. Insurance and reinsurance, with a managed care twist, might be part of the solution. Bruce Pyenson is a principal and a consulting actuary at Milliman Inc., in New York. He can be reached by e-mail at «bruce.pyenson@milliman.com» or by phone at (646) 473-3201. INNOVATIONS IN HEALTH INSURANCE Health insurance not only protects patients, it also can help to create and stabilize markets for services. While health insurance — which emerged from early accident and disability insurance — is about 100 years old, it really started taking the shape we recognize today when Blue Cross and Blue Shield plans were organized in the 1930s. The purpose of these plans was to pay for members’ high-cost medical expenses by pooling funds, and to create a more reliable, stable source of income for affiliated hospitals (Blue Cross) or affiliated physicians (Blue Shield). To guarantee affordable and timely access to medical services, these new Blues insurers made connections to both providers and membership organizations, such as employers. Fast forward 50 years. By the early 1980s, organ transplants had begun to prove their worth. Some advocates predicted tens of thousands of transplants annually. Given the uncertain incidence and the high costs of transplants, self-insured employers and insurers had to struggle with the challenge of how best to provide coverage. Questions also arose over who benefited from the new technology. Fairly quickly, a two-pronged solution emerged to address these issues: • Special-purpose organ transplant reinsurance supplied an important part of the financing solution.1 • Centers of excellence provided high-quality care at lower and more predictable costs, achieved through expertise and economies of scale.2 The combination of stable funding and the ability to direct patients to high-quality providers helped to 1 2 See BCS Insurance Group: «www.bcsigroup.com/plan/product/ transplant.html». Accessed Oct. 16, 2008. See United Resource Networks: «www.urnweb.com/gateway/public/ broker/broker.jsp». Accessed Oct. 16, 2008. NOVEMBER/DECEMBER 2008 · BIOTECHNOLOGY HEALTHCARE 31 http://www.bcsigroup.com/plan/product/transplant.html http://www.bcsigroup.com/plan/product/transplant.html http://www.urnweb.com/gateway/public/broker/broker.jsp http://www.urnweb.com/gateway/public/broker/broker.jsp
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