Managed Care - March 2009 - (Page 14) Million-Dollar Claim Club The increase in the number of catastrophic claims is shocking, but there are things that insurers and employers can do to protect themselves By Maureen Glabman Contributing Editor dollar claim is a growing threat to plan profitability and solvency, he says. In 2000, the rate was less than one million-dollar payout for every million members, according to a study by Evergreen Re and Ingenix. By 2005, it was 11 claims per million members. In 2010, it is projected to more than double: 24–36 claims per million members. Two-million-dollar claims are accelerating also, from zero in 2000 to 2–7 per million members expected in 2010. “[T]he overall trend is undeniable and shows no sign of slowing,” an ING Reinsurance bulletin warns. “Over the next six years, we can expect $2-million claims to grow as quickly as $1-million claims grew over the past six years.” Copious reinsurance coverage for just in-hospital care was once sufficient because hospitals were the location for most, if not all, high-dollar claims. It is no longer adequate for new, expensive theraharles Crispin tells the sad tale of a commercial health plan that opened for business in January 2006. A month later, a hemophiliac member started bleeding, requiring large doses of a blood factor, an expensive clotting drug. By April, the patient had received so much that he reached his lifetime policy limit of $5 million. Over $3 million was for factor product administered in an outpatient setting. The plan paid for it all out of reserves: It began operations with $6 million in statutory reserves, $1 million greater than required by the state. But as a result of inadequate reinsurance, the plan had to absorb almost 100 percent of the claim itself. Five million dollars of surplus was wiped out, and the plan now sat far below state requirements. It might have gone under were it not for a wealthy and ”WE’VE SEEN A CATACLYSMIC SHIFT willing parent able to infuse cash to boost IN THE COST OF CARE, MOSTLY DUE reserves. “In the last five to seven years, we’ve seen TO SPECIALTY DRUGS, TRANSPLANTS, a cataclysmic shift in the cost of care resultAND NEONATAL CARE,” SAYS CHARLES ing in a huge increase in both severity and frequency of catastrophic claims, mostly CRISPIN, CEO OF EVERGREEN RE, due to specialty drugs, transplants, and neonatal care,” says Charles Crispin, CEO of A MAJOR REINSURANCE BROKER. Evergreen Re, said to be the nation’s largest managed care reinsurance broker. pies delivered in outpatient facilities, physician offices, and even at home, according to Evergreen Re, a division of Brown & Brown. In the case of the Mission control hemophiliac, most expenses were not incurred in Crispin is on a mission. He fervently publishes a hospital. articles in the insurance trade press, gives webi“Many plans and insurers are still buying tradinars to America’s Health Insurance Plans (AHIP) tional reinsurance that often leaves them exposed members and engages in napkin math during to large claims outside the inpatient setting, and,, luncheons with chief financial officers of insurers. regrettably, many are just buying inpatient coverHe cautions them that medical advances allow paage with a lot of internal limits, further rendering tients to receive more intensive treatment and more their strategy ineffective when it comes to the frequently, causing a rise in million-dollar claims. largest claims,” Crispin says. Considered science fiction in 2000, the million- C 14 MANAGED CARE / MARCH 2009
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