One of the first rules of population health is that five percent of the population generates 50% of total healthcare costs.  

However, that five percent of high-cost claimants is a heterogenous population.  

Two and one-half percentage points of the five percent are claimants that were either high-cost claimants the previous year with ongoing complex medical situations or with claims related to chronic diseases such as diabetes or multiple sclerosis.  

HOWEVER, the other two and one-half percentage points of the five percent are claimants that generated zero or almost zero claims in the previous 12 months.  

They essentially ‘blow up’ out of nowhere. 

Those are the two ways high-cost claimants can ‘start.’ 

Additionally, high-cost claimants end’ in two distinct ways as well:  episodic and prolonged. 

Episodic high-cost claimants will have a burst of high-cost claims over several weeks to months and then the claims fall back to almost zero. 

Prolonged high-cost claimants have high claims that continue for months or even years. 

With these parameters, we can create a 2 X 2 matrix…making 4 categories of high-cost claimants.  Let’s examine each: 

1) Previously known and prolonged high costs—examples include patients with Type 2 Diabetes who progress to End-Stage Renal Disease requiring dialysis, Multiple Sclerosis patients who take very expensive specialty medications, and patients who have cancer and are undergoing continued chemotherapy and other treatments. 

2) Previously known and episodic high costs—examples include patients with Type 2 Diabetes who have a sudden heart attack (myocardial infarction) then recover and different Multiple Sclerosis patients who have a severe ‘flair’ of their symptoms requiring hospitalization, but who recover and are managed on less expensive medications. 

3) Previously unknown and prolonged high costs—examples include patients with undiagnosed Type 2 Diabetes who have a severe stroke requiring extensive care, patients with undiagnosed osteoarthritis who have knee replacement surgery that has complications (e.g. post-operative infection, needing artificial joint removal and replacement), severe trauma such as an accident/fall and a premature newborn baby with complications requiring a neonatal ICU stay. 

4) Previously unknown and episodic high costs—examples include patients with undiagnosed Type 2 Diabetes who have a sudden heart attack, patients with undiagnosed osteoarthritis who have a successful knee replacement without complications, and a significant sports injury in an otherwise healthy individual who recovers well. 

How Employers Can Use Plan Design to Better Help High-Cost Claimants 

The large upfront deductible of most health insurance plan designs is a major financial burden for plan members.  High-cost claimants have to deal with the stress of a major medical issue AND financial hardship simultaneously. 

—What employers can do:  offer a $0 deductible, copay-only plan design that is still actuarially equivalent to the existing plan design.  This new plan design allows out-of-pocket costs for plan members to be more evenly spread out and not such a major shock in the beginning. 

The confusing, unknowable cost-share of most health insurance plan designs prevents patients from seeking value consistently over the course of their care.  High-cost claimants understandably ‘throw their hands up’ in defeat and just hope their own money will not be wasted. 

—What employers can do:  offer easy-to-understand copays that vary in dollar amount depending on the cost and quality of medical care (lower cost, higher quality doctors have lower copays).  High-cost claimants can tie their choices to a knowable cost to themselves. 

To address overall health plan costs, an employer must address high-cost claimants.  Plan design is a key part of any high-cost claimant strategy.