As Healthcare Costs and Medical Claims Rise, Insurers Must Work to Help Employers Manage Both

As Healthcare Costs and Medical Claims Rise, Insurers Must Work to Help Employers Manage Both

By: Tara Krauss, Head of Accident & Health at QBE North America

It’s no secret that most employers in today’s economy are looking for better ways to fund affordable benefits. This need will only grow more urgent as the rate of high-cost claims rises, thanks in part to the prevalence of comorbidities, an aging workforce and the proliferation of expensive breakthrough treatments. Inflationary pressures passed through the provider ecosystem will drive costs even higher creating an uncertain future.

In fact, the average cost of healthcare for a hypothetical family of four in 2023 is more than $30,000 according to the Milliman Medical Index, an increase of over five percent from 2022.

As outlined in QBE North America’s 2023 Accident & Health Report – findings of which are based on industry research and QBE’s extensive claims database – the frequency of medical stop loss claims exceeding $200,000, per 10,000 covered individuals, continues to rise at a faster rate than before and during the height of the pandemic in 2020. This increase was primarily driven by a 21 percent rise in the frequency of claims for neoplasms, which accounted for 45% of all stop loss claims in 2022. Furthermore, the average cost of a neoplasm claim rose 14 percent to $390,000 in 2022. This increase is due largely to patients missing or delaying routine care during the pandemic. Additionally, there was a higher overall claims frequency from 2021 to 2022. Mental illness and circulatory claims climbed this year, and while respiratory claims were down from last year, frequency remains higher than pre-pandemic levels for all cohorts.

Many employers with self-funded health plans leverage a medical stop loss policy to insulate their financial plans from growing risks. This coverage has become increasingly popular over the last decade as new issues arise that could threaten a business’s entire livelihood.

As the regulatory landscape changes, healthcare and insurance costs continue to rise. Because of this, employer interest in self-funding employee healthcare coverage is expanding. One option to increase the effectiveness of a self-funded program is writing medical stop loss coverage in a captive. Single parent and group captives have proven successful in reducing fixed insurance expenses, delivering transparency and often capture underwriting profits and investment returns that would otherwise revert to an insurance company, ultimately reducing the cost of risk.

While medical stop loss can offer outstanding protection, many employer-groups lack the resources and fundamental knowledge to effectively launch a captive solution for their self-funded health plan.

QBE North America saw an opportunity to help bridge that gap and better support employers who self-fund their health plans – that’s where Agora comes in. The company is expanding its captive service model, known as the Captive Curve, with Agora, a newly formed segregated cell company owned, sponsored and underwritten by a wholly owned subsidiary of QBE Insurance Company.

The program targets organizations with at least 50 employees that are focused on transparency and control of rising healthcare costs. Aiming to provide a more turn-key captive solution, employers with Agora will have an easy point of entry to the captive space as well as the ability to customize a solution to meet a variety of stakeholder needs. It's more efficient, ultimately helping to reduce unnecessary costs, long-term commitments and potentially adverse contract terms.

Agora is just one part of QBE North America’s captive service model, The QBE Captive Curve, which offers solutions including agency branded captives, closed group captives, single-parent captives and insurance management services for employers that already own a captive.

Because today’s economic challenges make providing comprehensive and affordable healthcare coverage for employees more difficult for organizations of all types, we think it’s critical to maintain an ongoing dialogue around industry trends and insights. By doing so, we, as a provider, can continue to evolve and meet our customers everchanging needs by offering advanced solutions and strategies. You can read more about current market trends by downloading the full QBE North America 2023 Accident & Health Market Report