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High-cost, High-demand Populations: Three trends impacting the bottom line for medical insurance payers
Oct 31, 2022
How do you provide comprehensive, effective healthcare benefits and protect your margin when medical costs are slated to continue their rise in 2023 and beyond? Nationally, healthcare expenditures are expected to reach $6.8 trillion by 20301. And with more U.S. employers moving to self-insurance to contain employee healthcare benefit costs, the stop-loss market has grown by more than 40% over the last four years, reaching $22.5 billion in 20222.
Given these soaring costs, healthcare payers are under competitive pressure to have a broad range of services and coverage available at the lowest possible cost. To satisfy this competitive dilemma, payers need to gain more predictive power over how these trends will affect costs. But where do you start?
The first step is to start with the right insights into the trends driving this continual increase, including:
1. Climbing costs: Increasing specialty pharmacy costs, including a growing pipeline of new cell and gene therapies.
While medical advances can improve health and be more cost-effective in the long run, many can also lead to an increase in spending and the overutilization of expensive new therapies with minimal evidence-based ROI results. When the first gene therapy reached the market in the U.S., it was initially priced at $850,000 for one-dose – a significant example of the potential for new costs3. Specialty medications, including biologics and gene/cell therapies, account for more than half of medication spending, though only 2% of the population use specialty drugs4.
2. Lack of visibility: Unforeseen drug approvals in the FDA approval pipeline, such as with Hepatitis C medications, and the unexpected impact these high-cost claims have on the financial health of payers.
While more than 600 gene and cellular therapies are in the approval pipeline, by 2025 the FDA estimates it will approve 10 to 20 gene and cell therapies each year5. Annually, FDA drug approvals are double what they were 15 years ago6 — a sign of scientific progress, but also an increasing signal that new approvals are only expected to grow.
Note, for example, the unpredicted approval in June 2021 of an Alzheimer’s treatment despite internal FDA controversy. The drug’s initial price tag of $56,000 per patient per year (reduced by half in December 2021), is significant, even if unforeseen, to the estimated 6.2 million Americans with Alzheimer’s disease and their healthcare payers. In short, predicting future high-cost risk in emerging treatment therapies within this dynamic, uncertain environment is becoming increasingly difficult.
3. The “COVID-19 crush”: Multiple impacts to the quality of care and payers’ costs due to long-haul patients who are multisymptomatic and/or have comorbidities, and individuals who delayed care for other chronic conditions due to the pandemic.
Healthcare demand, and in turn healthcare inflation, is increasing as patients return to hospitals and doctors’ offices after avoiding them throughout the pandemic. Despite this latent demand, healthcare inflation — combined with the short supply of healthcare professionals — continues to compound issues with quality of care and affect the costs of operations, supplies, administration, and facilities.
Boosting predictive power with real-world data, processes, and accelerators
As healthcare costs continue to climb, understanding market trends is a good first step. The next step is deciphering the impact of these trends with the right data — data that often goes beyond what payers see in their own book of business.
To better assess risk and quantify the impact of high-need, high-demand members, payers are increasingly turning to artificial intelligence and machine learning (AI/ML) to identify areas of risk in populations. Advanced risk models, developed with comprehensive market data, are used widely for the purposes of underwriting, “lasering,” and care management to help balance costs while still delivering a more cost-effective healthcare benefit for the consumer.
Payers also need technology to efficiently analyze the underlying drivers of risk and make smarter decisions based on data. Organizations can utilize IQVIA’s technology accelerators such as natural language processing (NLP) that get insights from unstructured inputs or use native-cloud platforms such as Snowflake to optimize data transfer.
IQVIA’s advanced analytics and technology expertise combined with market-leading data generate precise and detailed insights that help to pinpoint high-need potentials within a target population.
The right actions with the right support
By taking the right actions with data, analytics and technologies, payers can create value for customers by improving healthcare for consumers while still managing costs in a dynamic environment.
Ultimately, the right data, processes, and technology accelerators can boost your predictive power and reduce future risk, regardless of the trends impacting the future of healthcare.
2 https://www3.ambest.com/ambv/sales/bwpurchase.aspx?altsrc=108&record_code=317040&_ga=2.39401251.165563560.1666737243-1460329130.1666737243 Jan 2022, Market Segment Report: More Self-Insured Plans Drive Stop-Loss Segment Growth
4 https://www.evernorth.com/articles/specialty-drug-trends-and-utilization
6 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8802986/
7 https://www.nejm.org/doi/full/10.1056/NEJMp2111320?af=R&%3Brss=currentIssue
Healthcare expertise & unparalleled data to predict risk
Learn more about how the right data, the right processes, and the right accelerators can help drive the right actions, including improved loss ratios, modified benefit designs, and increased care, all while you continue to manage revenue.