Rene Papin's What Is The Total Cost Of Risk?

Group Benefits plans provide health, dental and prescription coverage, typically these benefits have a maximum that limits the exposure of a companies’ benefit plan to large claims. Most benefit programs have unlimited prescription drug coverage. To protect the employer’s benefits plan, insurance providers offer reinsurance to cover all prescription drug costs above the stop-loss amount usually set at $10,000. The amounts of claims paid above the stop-loss are pooled to protective the integrity of the group coverage.

You, as an employer, need to know how much your maximum prescription exposure is and if the insurance provider has made any changes.

The following are some questions you may ask your employee benefits consultant.

  1. If there is a large claim by an insured individual, how much of the claim will affect our experience and therefore future premiums, and how much of it is shared with the insurance provider?
  2. How does the EP3 program work to provide additional protection?

Here are two examples of very high prescription drug claims.

  1. A person with Hepatitis C has a prescription for Harvoni a newly approved treatment that can cure the disease.  The problem for the employer is that the patient will require a 90-day course of treatment of one pill per day at cost of $69,000.
  2. A person with Multiple Sclerosis takes P. Acthar Gel. This drug helps manage the disease but does not cure it, so probably long term commitments at around $200,000 per year.

Be sure your benefit plan design assesses and deals with the high-cost drugs.

There are two points to consider.

  1. A plan with a low maximum may leave an employee with no coverage at a difficult time.
  2. A plan with no maximum drug coverage on specialty drug could make the plan unaffordable.

There are several ways to limit exposure to high healthcare claims from claim management, drug benefit formulary to promoting good health among the members of the plan.

Each insurer has unique health and dental claims adjudication practices and pharmaceutical arrangement that need to be reviewed in determining the true competitiveness of the insurer’s costs. How can you manage the risks inherent in an employee benefits program if you do not understand the total cost of risk?

A total cost of risk audit should be completed to help your business identify the specific risk factors associated with current benefits plan. This can also help determine if lower cost generic drugs are available as well as ensuring that claims fraud within these benefits provisions has been identified.

There are four business benefits for identifying risk elements and determining your level of compliance.

  1. Quality improvements in compliance help to prevent errors or failures before they occur and can help to detect them in the earliest stages.
  2. Greater efficiency in compliance and risk management should be embedded in the DNA of the business operation and not siloed in a separate department. This will produce more efficiency in all business tasks.
  3. Trust and brand loyalty develops a clear, effective and broadly communicated risk management compliance program which helps internal and external stockholders have greater confidence that the business will meet its goals.
  4. Competitive differentiation helps the business drive better outcomes through efficiency while reducing overall risk.

Implementing these programs can help reduce the cost of your health benefits plan.