In health insurance, we often hear about the 10-85 rule: 10% of the insured population drives 85% of the costs. But what if we could design plans that cater to that 10% without compromising affordability for the remaining 90% that causes 15% of the cost? This article explores the 10-85 rule, offering data-driven strategies to optimize plan design and improve client outcomes.
Here’s what we’ll cover:
- Understanding the statistical distribution of healthcare costs
- Identifying high-cost claimants and their unique needs
- Designing plans that balance affordability and comprehensive coverage
- Leveraging technology for data-driven decision-making
P.S. Shenandoah Valley Group can help you navigate these challenges. We offer innovative solutions that simplify benefit management, reduce costs, and empower you to provide the best possible care for all your clients.
Understand the Statistical Distribution of Healthcare Costs
The 10-85 rule in health insurance is a crucial concept that illustrates the uneven distribution of healthcare costs among policyholders. It suggests that a small portion of the insured population, approximately 10%, accounts for a disproportionately large share of the overall healthcare expenses, around 85%. This highlights the fact that healthcare costs are not evenly distributed; instead, they tend to be concentrated among a relatively small group of individuals.
Understanding this statistical distribution is essential for designing effective and sustainable health insurance plans. By recognizing that a small percentage of individuals generate the majority of healthcare costs, insurers can develop strategies to manage these high-cost claimants while maintaining affordability for the rest of the policyholders.
Think of it like this:
- The majority (90%): These individuals generally utilize preventive care and occasional treatments for minor illnesses. Their healthcare costs are relatively predictable and manageable around 15% of the cost.
- The high-cost claimants (10%): This group often includes individuals with chronic conditions, those requiring expensive procedures or medications, or those who frequently use healthcare services. Their costs are significantly higher and can strain traditional insurance models around 85% of the cost.
By analyzing claims data, we can gain valuable insights into the specific needs and cost drivers associated with high-cost claimants. This data can help us identify:
- Individuals with chronic conditions like diabetes or heart disease
- Those requiring expensive treatments such as chemotherapy or surgery
- People who frequently utilize healthcare services, including emergency room visits
Understanding the characteristics of this group allows insurers to tailor plans and benefits to better address their needs and potentially mitigate the high costs associated with their care.
Identifying High-Cost Claimants and Their Unique Needs
Now that we understand the uneven distribution of healthcare costs, the next step is identifying the individuals who fall into that high-cost 10%. This is about understanding their needs to offer better care and manage costs effectively.
Think of it like this: a doctor wouldn’t prescribe the same medication to every patient, right? They need to diagnose the specific condition before determining the best treatment. Similarly, insurers need to identify the “healthcare conditions” of their high-cost claimants to design appropriate plans and interventions.
Here are some key characteristics and needs often associated with high-cost claimants:
- Chronic Conditions: Individuals with chronic diseases like diabetes, heart disease, or cancer often require ongoing treatment and management, leading to higher healthcare costs. They might benefit from plans with lower out-of-pocket costs for prescription drugs, specialist visits, and preventive care.
- Expensive Treatments: Those requiring major surgeries, specialized therapies, or long hospital stays can incur significant healthcare expenses. Plans with comprehensive coverage and case management support can help navigate these complex situations.
- Frequent Healthcare Utilization: Some individuals may frequently visit the emergency room, require multiple tests or procedures, or have a history of hospitalizations. Understanding the reasons behind this frequent utilization can help identify opportunities for preventive care, care coordination, and better disease management.
How do we identify these individuals?
Data analysis is key. By analyzing claims data, insurers can identify patterns and trends that indicate high utilization and potential high costs. This data can reveal:
- Types of services utilized: Frequent emergency room visits, specialist consultations, or specific procedures.
- Cost of services: High-cost medications, treatments, or hospital stays.
- Diagnosis codes: Identifying individuals with chronic conditions or complex healthcare needs.
Shenandoah Valley Group employs a data-driven approach to identify high-cost claimants through our Medical Shopper Program. By analyzing claims data, including NDC numbers, drug prices, and PBM data, SVG helps pinpoint individuals who would benefit most from cost-saving strategies for high-cost drugs and hospital procedures.
Once high-cost claimants are identified, it’s crucial to understand their unique needs. This might involve:
- Individualized assessments: Conducting health risk assessments or reviewing medical records to understand specific conditions and potential risks.
- Personalized communication: Engaging with high-cost claimants to understand their healthcare goals, concerns, and preferences.
- Targeted interventions: Offering case management, disease management programs, or wellness initiatives to support their healthcare journey.
By understanding the needs of high-cost claimants, insurers can design plans that offer appropriate coverage, support, and resources, ultimately leading to better health outcomes and more sustainable healthcare costs.
Designing Plans that Balance Affordability and Comprehensive Coverage
The 10-85 rule presents a unique challenge for insurers: how do you design health plans that provide adequate coverage for high-cost claimants without making premiums sky-high for the remaining 90%? It’s a balancing act, but with careful planning and innovative strategies, it’s achievable.
One such strategy is exemplified in the Copay Plan. This plan offers a tiered approach with varying levels of coverage and cost-sharing, allowing individuals to choose a plan that best suits their needs and budget.
Here’s a closer look at how this Copay Plan addresses the needs of both high-cost claimants and the majority of policyholders:
For the majority (90%)
- 100% Coverage for Preventive Care: The plan covers preventive care services for adults, women, and children at 100%, encouraging utilization of these cost-effective services and promoting long-term health.
- Telephonic Primary Care Services: With 100% coverage for telephonic primary care services, the plan promotes accessible and convenient care, potentially reducing the need for more expensive in-person visits.
- Comprehensive Coverage: The plan includes coverage for a wide range of services, including office visits, urgent care, emergency room visits, durable medical equipment, and prescription drugs.
For high-cost claimants (10%)
- Tiered Hospital Benefits: The plan provides tiered hospital benefits with varying levels of coverage, allowing individuals to choose a level that aligns with their anticipated needs and risk tolerance.
- High Deductible, Low Premium Options: The plan offers options with deductibles ranging from $0 to $500 for individuals and $0 to $1,000 for families. This allows healthy individuals to opt for lower premiums in exchange for higher deductibles, providing a safety net for catastrophic events while keeping costs down for routine care.
Key takeaways from this Copay Plan:
- Flexibility: By offering a range of options, the plan caters to diverse needs and budgets.
- Value: The plan incentivizes preventive care and provides comprehensive coverage for essential services.
- Affordability: The plan offers high-deductible options for those seeking lower premiums and tiered benefits to manage costs.
In addition to the features of this Copay Plan, here are some other strategies that can help balance affordability and comprehensive coverage:
- Value-Based Insurance Design (VBID): Incentivize utilization of high-value, cost-effective services, such as preventive screenings and chronic disease management programs.
- Chronic Disease Management Programs: Offer specialized programs for individuals with chronic conditions to provide education, resources, and support.
- Data-Driven Personalization: Use data analytics to identify individuals with a high risk of incurring high healthcare costs and offer personalized plan recommendations.
- Leveraging Technology: Utilize online platforms and decision support tools to improve efficiency and empower policyholders.
By incorporating these strategies and learning from the Copay Plan example, insurers can design plans that meet the needs of all policyholders while promoting a more sustainable healthcare system.
Leveraging Technology for Data-Driven Decision-Making
In today’s digital age, technology plays a vital role in helping insurers understand and apply the 10-85 rule effectively. By leveraging data analytics, automation, and intelligent systems, insurers can make more informed decisions, personalize plans, and ultimately improve client outcomes.
Here are some key ways technology can empower insurers in the context of the 10-85 rule:
Data Analysis and Risk Stratification
- Identify High-Cost Claimants: Utilize data analytics platforms to analyze claims data, identify patterns, and pinpoint high-cost claimants. This involves analyzing factors such as types of services utilized, cost of services, and diagnosis codes.
- Predict Future Costs: Employ predictive modelling to forecast future healthcare costs based on individual risk factors, claims history, and demographic data. This allows for proactive interventions and personalized plan recommendations.
- Segment Populations: Group policyholders into different risk categories based on their healthcare needs and potential costs. This enables targeted communication and customized plan offerings.
Plan Design and Optimization
- Automated Plan Recommendations: Develop algorithms that recommend optimal plan options based on individual needs, risk profiles, and budget constraints.
- Cost Modelling: Simulate the financial impact of different plan designs and cost-sharing structures. This helps insurers understand the potential costs and benefits of various options.
- Dynamic Pricing: Utilize real-time data to adjust premiums and cost-sharing dynamically based on individual risk factors and healthcare utilization.
Personalized Communication and Engagement
- Targeted Messaging: Deliver personalized messages and educational materials to policyholders based on their risk profiles and healthcare needs.
- Digital Platforms: Utilize online portals and mobile apps to provide easy access to plan information, claims status, and healthcare resources.
- Chatbots and Virtual Assistants: Employ AI-powered chatbots to answer questions, provide support, and guide policyholders through the healthcare system.
Streamlined Administration and Automation
- Automated Claims Processing: Utilize AI and machine learning to automate claims processing, reducing errors and improving efficiency.
- Online Enrollment: Offer online enrollment platforms that simplify the enrollment process and reduce administrative burden.
- Digital Health Records: Integrate with digital health records to access real-time patient data and facilitate care coordination.
Examples in Action
- Shenandoah Valley Group’s Medical Shopper Program: This program leverages technology to collect and analyze data, such as NDC numbers and drug prices, to identify cost-saving opportunities for high-cost claimants.
- Shenandoah Valley Group’s Online Benefit Administration: SVG utilizes software technologies to offer an easy and manageable system for quoting, enrolment, tracking, and continuous communication, streamlining the benefits administration process.
By embracing these technological advancements, insurers can harness the power of data to understand the 10-85 rule, design better plans, manage costs effectively, and ultimately provide better care for all policyholders.
Unlock the Power of the 10-85 Rule: Smarter Plans for a Healthier Future
Understanding the 10-85 rule is like having a secret weapon in the fight for better healthcare. By recognizing the uneven distribution of costs and leveraging data-driven strategies, we can design plans that cater to the needs of all policyholders, not just the majority. This means better care, improved outcomes, and a more sustainable healthcare system for everyone.
Here are the key takeaways to remember:
- Data is King: Analyze claims data to identify high-cost claimants and understand their unique needs.
- Embrace Variety: Offer a range of plan options to cater to diverse needs and budgets.
- Value-Based Care: Incentivize preventive care and chronic disease management.
- Tech-Savvy Solutions: Leverage technology for data-driven decision-making, personalized communication, and streamlined administration.
25%-55% Savings on Premiums
When you adopt the 10-85 (minority) rule or its counterpart, the 90-15 (majority) rule, you open the door to effective planning for the benefit of everyone in the group. Once you fully grasp these rules, you can implement strategies that cater to the needs of all group members. By leveraging these types of plans, you can expect to achieve savings on premiums ranging from 25% to 55%.
Shenandoah Valley Group understands the complexities of the 10-85 rule. Our innovative solutions, like the Medical Shopper Program and online benefit administration platform, empower you to design and manage plans that balance affordability and comprehensive coverage. We’re here to help you navigate the challenges and unlock the potential of data-driven healthcare.