Wednesday, December 4, 2013

How Medical Claims Are Distributed in the Private Healthcare Market

Here are the most interesting numbers and graphs from a 2011 Milliman reportrt on high cost medical conditions in employer health benefit plans in 2010. 
  • In a typical employer group, only 0.2% of people incur annual medical claims over $100,000. Examples of high-cost “routine” events are 
    • cardiac revascularization at about $72,000 per year, 
    • stroke at $61,000 per year, and 
    • cancer patients not receiving chemotherapy or cancer surgery at $14,000 per year.
  • High-cost but routine events are rare enough that the average claims cost for that total population is slightly less than $4,000.
High cost or catastrophic conditions, the kind that employers purchase stop-loss coverage for, include stroke, cardiovascular surgery, hemophilia, HIV, transplants, end-stage renal disease, newborns with extreme problems, cancer, and people with respiratory failure on ventilators. 
  • Of those with catastrophic conditions, about 6 percent of people with these conditions have claims over $100,000. 
  • Most fall into the $20,000 to $50,000 range.
  • In the under-65 population, the number of organ/tissue transplants is about 208 per 1 million people – or about 2 per 10,000.
  • Just through random fluctuation, an employer covering 10,000 members might easily experience 4 transplants in a year.  
Insurance adjusts for catastrophic risks through pooling and other techniques. For example, a group of 50 covered individuals might incur about $200,000 in health insurance claims in one year. The unlikely event of one organ transplant in that small group could cause the total cost to double. By contrast, a group of 5,000 covered individuals might incur $20 million in claims in one year. That same organ transplant in a larger group would add only 1% of incremental cost. Consequently, insurance programs use pooling, stoploss and other techniques to spread the risk of unlikely catastrophic events.