Healthcare costs are surging, and organizations are under pressure to strike a balance between employee expectations and the financial sustainability of their benefits programs. This special “On Aon” episode examines what’s behind these rising costs and what companies can do to tackle these risks in the new year.
Experts in this episode:
Doug Melton, Leader of Client Analytics for Human Capital
Meghan Rausch, Analytics Solution Development and Commercialization Leader
Additional Resources:
The Global Medical Trend Rates Report 2025
Helping Employers Navigate the Rise in High-Cost Medical Claims
Key Trends in U.S. Benefits for 2024 and Beyond
Tweetables:
“It’s really important that employers have strategies in place to try to get ahead of these increasing costs and plan for them.” — Meghan Rausch
“Employers need to know their future risk, not base their strategy on their historical risk.” — Meghan Rausch
“Employers need to look toward the future as they’re trying to manage some of these risks.” — Meghan Rausch
Intro:
Hi everyone, and welcome to the award-winning “On Aon” podcast, where we dive into some of the most pressing topics that businesses and organizations around the world are facing. Today, we hear from Meghan Rausch for a closer look at what high-cost claimants are, what’s driving them, and what companies can do to mitigate the risks. Now, please welcome this episode’s host, Doug Melton.
Doug Melton:
Hello, audience. My name is Doug Melton. I am the leader of Client Analytics for Human Capital at Aon. And when we define human capital, we are specifically talking about the health benefits and compensation associated with the workforce. That's our definition of human capital. In today's podcast, we're discussing the rise of the million-dollar healthcare claim. Once uncommon, these high-cost claimants are a significant challenges for employers looking to manage rapidly rising healthcare costs. In fact, our chief actuary this past summer released a study saying in 2025, U.S. medical costs will increase by nine to 10 percent, which translates into $16,000 per employee. Globally, that medical cost trend is expected to increase by 7 percent in 2025. So, these are two issues that are financially eating into both our economy and into our wallets, and therefore it makes sense for us to talk about it today. Expert to join us today is Megan Rausch, the Vice President of Analytics Solution Development and Commercialization at Aon. Thank you for being here today, Megan.
Megan Rausch:
Yeah, thanks Doug. Happy to be here.
Doug Melton:
So, in our discussion today, we want to walk through high-cost claimants, sort of what's driving them, are there any implications beyond just the medical cost that we should think through? And really specifically what companies can do to mitigate that risk, both now and as we enter 2025. So, we certainly want to do that, but by definition, for those not familiar in the healthcare world and references to high-cost claimant, why don't we just open up with the basic question by having you define what is a high-cost claimant in your own words?
Megan Rausch:
Yeah, so you can think of a high-cost claimant as those people on the health plan that are disproportionately driving the health spend. So, think of them as this small group, maybe the top 5 percent of claimants that are driving about 60 percent of the plan spend. And what's important about these high-cost claimants is they are the ones actually driving up a lot of this plan trend. So, Doug, you mentioned that our health plan trend is nearing double digits. High-cost claimants are a huge driver of this trend, and what's interesting is we used to think of high-cost claimants as these random one-off events, but in recent years we found that they're actually coming from complex conditions, polychronic conditions, so people that are expected to be high cost year over year. So, they're becoming a lot more predictable. But these people are also driving a lot of the volatility in the spend. They're becoming more expensive; they're happening more often. So, it's really important that employers have strategies in place to try to get ahead of this and plan for it.
Doug Melton:
Are there types of, just to make it real for more people, as we defining this, are there types of conditions that typically, or events that are typically associated with high cost claimants that I guess would, that we expect to pop to the list?
Megan Rausch:
Yeah, so you can think of people with a lot of chronic conditions that have just not been managed very well. So that risk is just building up over time. We've seen huge increases in cancer. So especially for those cancer patients who may not be getting quality care or may have a lot of other chronic conditions in addition to cancer, we've seen a lot of cardiovascular issues, things like hypertension, also contributing to high cost claims, other things just contributing. Just think of these new treatments that are coming out too. So, there's been great advancements in medicine, which are bringing game changer, life-saving therapies, but they come at a really big cost. So, you can think of things like innovative cancer treatments, these gene therapies that are coming out to treat those previously thought of untreatable conditions. So, a really exciting time, but it brings significant cost with it.
Doug Melton:
So, if we bucket the categories, would it be fair to say the high cost claimants are using, to your point, advanced therapies, hospitalizations, extended hospitalizations, the need for more surrounding care? I'm just trying to uncover a little bit more specifically. As you look at the site of service of care, where is that area probably being driven by?
Megan Rausch:
Yeah, I would say high class claimants are being driven by in-patient admits. We've been seeing a lot of longer stays in the hospitals. We're also just seeing more expensive treatments too and more expensive drugs. So now more than ever, a lot of the drugs are driving some of these high cost claims too.
Doug Melton:
So, I think you did a really good job, Megan of defining the problem and what is the profile of the problem in terms of the condition and how that condition manifests into an adverse event that becomes really expensive, both to treat acutely as well as to treat long-term through advanced therapies. So if we now move into, so that's the problem. What's the actions that we're going to take? Let's talk about what companies can do and what strategies are being used to mitigate costs. I would specifically say, maybe let's start by focusing on what we think employers can do and best practice for employers and expand our definition of companies to maybe insurers or providers and see what they can do as well as they're equally a part of the ecosystem. But first, let's start with what do we think employers can do in this space?
Megan Rausch:
Yeah, absolutely. So, it's really important to have a framework or strategy around how to approach high cost claimants. First, employers should just know their risk. We think the best way to understand your risk is to use predictive modeling. So, understanding your future risk, not basing your strategy on your historical risk. So, Aon's built a predictive model health risk analyzer that predicts building high cost claimant risk in the population so you can really understand what's driving it.
So, once you really understand your risks, you can apply specific strategies. So, one is prevention and mitigation. So, thinking what are you doing to prevent high cost claimants in the first place? What are you doing to make sure that people are getting the right care? So, thinking, do you have the right care management programs in place? Are they targeting the conditions most likely to result in high cost claims? Are they actually managing the right people and are they managing them effectively?
So, our team of clinicians typically works with care management programs to make sure that all of the people that are being managed are being managed appropriately and tries to identify any actions that we might take to get ahead of some of this risk. Some other things that you might do are just performing clinical audits too. So, making sure that the care management programs are taking the necessary actions. So, once you kind of understand how you can manage the care, prevent and mitigate some of this risk, it's really important to also protect your budgets. So as I mentioned before, high cost claims are a huge driver of cost volatility. So some of the things that are leading employers to miss on their budget or they're causing these huge increases year over year. So, we've seen employers using predictive modeling to more accurately set their budget for the next plan year.
Doug Melton:
Interesting.
Megan Rausch:
Yeah. We've also seen employers using this information to select the right kind of risk transfer strategy. So do they want to buy insurance for this high cost claimant risk, their stop-loss? Do they want to take that risk and put it within a captive? Do they want to use some more emerging methods like getting access to a line of credit to smooth out some of this high cost claims?
Also, I think from a protect your budget, it's important to make sure that you're auditing your claimants. So performing things like fraud waste and abuse audits, high cost claimant audits to make sure that plan funds are being spent appropriately. And then finally, this isn't just a one-time exercise. What employers need to set themselves up to do is to continually monitor and evolve this strategy. So making sure that they're aware of any building risks within the population and changing their care management programs, assessing their budget accordingly.
Doug Melton:
So, you answered my question, in terms of, I like the pragmatic approach, specifically what employers could do, and then you added in, we talked about other companies, the insurance companies through the parametrics or the captives or the stop-loss. So they have a place to play as well. I guess, to ask the uncomfortable conversation because clearly the trends are going up. So, if something's not working, could you share at least one example of a use case in which someone used your framework and you achieved an outcome of health improvement and cost reduction? And then I'm sure you have a lot of examples in which you haven't been successful, and sort of what would be the lessons learned from that framework being used, but didn't it get to the intended outcome?
Megan Rausch:
Yeah, so I think the coolest example of this is when we pair the insights from our predictive modeling from our data and analytics along with deep clinical consulting. So, we worked with a large tech company to identify who are the top risks in their health plan and who's building in risk. And what we did is we had one of our MDs on staff review some of those highest cost claims to identify what actions might be missed or what actions should happen to try to get ahead of some of this building risk. So right now that MD is currently working with the Carrier Care Management program to try to define actions just to get ahead of some of these people's risk and ultimately get them to better care.
So Doug, you asked when is this not working? So we have a lot of employers that we work with that spend a lot of money on their care management programs, and they want to know, are these programs working? Are they engaging the right people in the programs? Are they helping get ahead of some of that building risk? So we actually worked with a large transportation company who was spending a ton of money on a care management program with a navigation vendor. They were buying the top tier program, and they wanted to know, is this program actually engaging my highest risk people?
So what we did is we ran Aon's Health Risk Analyzer to identify the future highest risk people in their population and worked with that navigation vendor to say, "Who of these people are engaged? Who have we actually tried to engage in your program and manage?" And what was really interesting is we found that actually half of the people that we identified as high risk were not even on this navigation vendor's radar.
Doug Melton:
Oh, wow.
Megan Rausch:
I would say things that were happening weren't working, but what was great, is we actually worked with this navigation vendor and Aon's team of clinicians and came up with a strategy to proactively try to get these people engaged in the program. And I'm happy to say we were actually able to boost engagement from about 5 percent to 20 percent, which is really impactful if you think about it, because we like to say for every person that's engaged and their care is being managed, we expect roughly about a thousand dollars in savings.
Doug Melton:
Very helpful, very tangible use case, for sure. That I think we all could take a lessons learned. If I give some commentary before we just move on, let's pause and go a little reflection here of what you shared with us. Incredibly insightful. You talked about one of the reasons what made it successful was the pairing of clinicians with the insights, right? So Cal and the clinical team go and actually execute these interventions around wellness, whether it be invasive medicine or overall wellness. I would say in addition to those clinicians, a communications team will be fundamental in it as well. A lot of times the lack of engagement is not a function of the vendor or the poor data and analytics. It's that we don't have a really good communications plan to inform the consumer. A numerous amount of times we've heard consumers in the hospital because of a gap in care, and we asked it to them, "Why aren't you taking your Crestor on Lipitor?"
And they just simply said, "I didn't know that mail order delivery was available. Had I known that I would've been more inherent to my medication, but no one ever told me of my benefits enrollment that it was something available." So, to the employers looking out there, in addition to sort of data scientists at step three and clinical interventions at step two and clinical interventions at step three. I would say it's step one; you want to make sure you have a robust communication plan so that when you roll out the analytics and the interventions, people know where to go and receive them. That's one. The second comment, since I talked about healthcare costs in the context of medical trend, other implications of high cost claimants that show up in the workplace adversely, would be higher probabilities of workers complications claims would be higher conversion rates from STD to LTD, not necessarily STD incidence rates, but those that go for STD into LTD.
And then third, unfortunately, which you never want to receive, would be mortality. And all of a sudden having a family that has to now survive off with less of a means in addition to not having a loved one there in a home, but losing any kind of insured benefits or income that came with that. So, as you think about these other aspects of high cost claimants, one part of your business will be impacted directly from the medical cost spend, but you'll see there are other secondary parts of your business as well, whether it be performance or absence that also get impacted. So just even further reason for us to get the high cost claimants down and be able to manage this in a very pragmatic approach as Megan so lovely described through her framework.
I think Megan, if you're a CHRO, you're a benefits manager sitting anywhere out there in the globe. And unit
Megan Rausch:
Yeah, I would just say utilizing data and analytics, just thinking more proactively and thinking towards the future as you're trying to manage some of these risks. I think that, as I mentioned before, a lot of these strategies have been built on the past, but with all this emerging technology, we can now build our strategy based on the future.
Doug Melton:
Thanks so much for joining us today, Megan, and providing those actionable insights that employers and others can take. That's our show for today, everyone. Thank you all for listening.
Outro:
Thanks for tuning in to the latest episode of “On Aon” with our episode host, Doug Melton and today’s expert, Meghan Rausch, for a discussion on what high-cost claimants are, what’s driving them, and what companies can do to mitigate the risks. If you enjoyed this episode, don’t forget to subscribe wherever you get your podcasts, and stay tuned for our next conversation featuring industry experts bringing you the latest on topics, including climate risk, workforce wellbeing, ESG trends, and much more. Be sure to check out our show notes and visit our website at Aon dot com to learn more about Aon.