I came across a few unique plan experiences within the past month. On the surface, things looked very positive, but for different reasons, the experiences were more complicated upon closer inspection. Collectively, they helped identify a list of key areas for plan sponsors and advisors to assess when times are good in order to understand if there are challenges lurking in the near future that could derail the plan’s performance.
It has become commonplace in recent years to see plans performing much better than what was seen in the previous 10 to 12 year period. That makes it easy to overlook some key diagnostic metrics that will help a plan better understand where the experience is going moving forward.
Read: Integrating data to see the full benefits picture
Here is a list of eight things gleaned from recent plan experiences to be looking for in good times to help prepare for when times might be less rosy.
1. Assessing changes in co-ordination of benefits (COB) and member cost sharing
- This a metric that often gets overlooked. Were there material changes in COB with public plans? With other private plans? Based on this assessment, are COB changes sustainable? What impact, if any, did changes in member cost sharing have on plan spending?
- I saw a plan experience recently where the increase in COB with other private plans had increased by over 60% year over year. That kind of significant growth is not likely to be replicated moving forward, and of course there is a risk that cost offloading to other plans may not be a permanent trend within the existing claims experience.
2. Quantifying changes in adherence to therapy and prevalence of chronic disease
- One plan had nearly a 10% decrease in plan spending, but only a 1% decline in claimants. Amazingly, it saw a 30% decrease in the number of claimants taking high blood pressure therapies, a 10% decrease in the number taking antidepressants and a 7% decrease in the number of members on cholesterol-lowering therapies. Can that be explained? Is this decrease in utilization artificial (i.e., possibly temporary) and related to poor adherence or is it related to sustainable improvements in health and wellness?
3. Measuring current saturation levels of age-related chronic conditions
- Based on the disease state and demographic profile of the group, is the plan currently under-saturated in terms of spending on age-related chronic conditions (ARCC)? If so, to what degree? What financial impact could that have on the plan moving forward?
- One recent plan experience had seen a material growth in spending for claims related to ARCC, but it was calculated that the number should have been $104,998 higher—that was the degree of current under-saturation based on the existing disease state and demographic profile of the plan population.
Read: 2014 Group Benefits Providers Report
4. Measuring current saturation levels of chronic specialty drug claims
- Again, based on the disease state and demographic profile of the group, is the plan currently under-saturated in terms of spending on recurring specialty claims? If so, in what areas and to what degree? What could that mean financially moving forward?
- Current plan spending on specialty drugs does not necessarily correlate to current saturation levels. One plan recently saw 31% of its plan spending devoted to specialty drug spending, yet it still carries a risk of a 49% increase in spending in this area—on top of what it is already spending.
5. Quantifying the average days’ supply of chronic claims
- If there is a material decline in the average days’ supply (ADS) of medication related to chronic claims there can be an impact on the average cost per claim number artificially making the experience look more cost-effective than it is. A decline in ADS can also appear as an artificial increase in utilization in certain key disease state areas.
6. Quantifying generic drug penetration rate & impact of pricing changes on claims experience
- This may seem like an obvious metric, but generic penetration needs to be considered more deeply than how it is normally reported. Has the plan looked at the combined impact of generics and multi-source brand product where there is no cost difference with generics? Has the plan experience accounted for the presence of brand co-payment cards in assessing generic penetration?
- Given that many plans have benefited from lower generic drugs prices in most regions over the past few years, what impact have lower costs had on year-over-year cost trends? Can similar savings realistically be considered moving forward? If so, to what degree?
7. Calculating the impact of the current plan design in containing plan costs
- Many plans equate lower overall cost trends with better plan performance, but has the impact of the current plan design itself been measured to quantify what direct impact it has had in containing costs? This measurement requires the full paid, reversed and rejected claims experience of a group.
- Is this current design going to be feasible moving forward?
8. Calculating per capita spending and utilization metrics without skewing factors
- Elements such as a surge in daily fills for medications such as Methadone and Suboxone and/or a material increase in seven to 14 day fills of medications can materially impact per capita and average cost metrics year over year. To what extent are they impacting the current plan metrics and the interpretation thereof?
These eight metrics can help plan sponsors determine if the current positive cost trends are likely to be sustained and help them plan for the next benefits period.