In a recent article published by Captive Intelligence, our Chief Property and Casualty (P&C) Actuary, Peter Johnson, reviews current trends in the P&C industry and how risk optimization can help cut costs and increase coverages. Check out the full article here.

Like many other industries, inflation has been top of mind for risk managers, insurers, and P&C professionals. McKinsey & Company estimated that inflation increased the cost of P&C claims by $30 billion in 2021,1 and it continues to be a primary concern across P&C lines. Property insurance is being hit hard this year. Hurricane Ian alone is expected to cost insurance companies over $60 billion.2 In combination with other recent catastrophic events (CATs) and construction cost inflation, this is driving substantial rate increases and higher underwriting standards for property policies. Inflation in auto costs and increased driving are also forcing insurers to respond with higher auto rates this year. So, cost-control practices will continue to be a main focus throughout 2023, both for insurers and businesses.

What impact is inflation having on the P&C market? Where is it hitting the hardest?

In the current hard market, we are expecting to see price increases across all lines of business, with an overall average increase of 9.3% in rates.1 Some of the top business lines being impacted include cyber, commercial property and personal lines/private risk (including private auto).

Following Hurricane Ian, we saw drastic increases in property insurance rates, with properties with poor risk quality seeing increases of 25% all the way up to 150% at the start of 2023.3 The number of natural disasters and level of exposure have been trending up over time, and costs are compounded by the need to rebuild with inflated prices and strained supply chains. According to NOAA National Center for Environmental Information, natural disasters cost the U.S. over $165 billion in 2022.4

When it comes to cyber, one of the toughest lines of business to write, we expect rates to increase as much as 50% for more complicated risks and 15% for simpler risks.1 This is less a result of inflation and more like growing pains for a newer market. As new risks continue to emerge and underwriting practices strengthen in cyber, it is difficult to predict how significantly inflation will influence costs.

Personal lines/private risk (including auto and homeowners insurance) rates are expected to increase almost 13% on average this year, with automobile rates seeing increases of 8-10% across the nation.1  Although Hurricane Ian and CATs dominated headlines in 2022, of the 15.5% increase in net losses across all business lines, private auto liability represented the largest sector in net incurred losses.5 Supply chain issues that drove up the prices for vehicle repairs and replacement had a direct impact on auto insurance claim severity and created a rate increase need for auto insurers to cover the cost increases. For many companies these rate increases are coming in conjunction with increased underwriting scrutiny, forced up retentions, and coverage reductions.

Workers’ Compensation is an exception to the norm this year. In spite of continued inflation, rates are expected to remain unchanged or slightly drop in 2023, with stable coverage options and underwriting practices. Employment Practices Liability is also looking favorable for buyers in 2023, with modest rate increases of 7% on average. Finally, Surety is also expected to see average increases just above 7%,1 but will face increased underwriting scrutiny with potential for larger rate changes on a case-by-case basis.

Geography is an important factor as well, and not just related to climate. For example, medical professional liability severity trends have increased, but this varies significantly by region. Some states are seeing double digit severity trends and rate increases while others are experiencing very modest increases. Differences in litigiousness and jury awards drive much of these state-by-state differences.

While most buyers are seeing rate increases and some reductions in coverage, high-risk clients are affected the most by continued inflation and other cost increases. This includes businesses with adverse loss histories, located in CAT-prone areas, or with frame construction buildings. Unfortunately, we are not seeing an influx of new players or investment to mitigate rising rates.

When looking at the industry level, Alera Group reports that the two sectors with the most unfavorable market situations are nonprofit organizations and the hospitality and gaming sector. Although nonprofits don’t make up a large portion of organizations in the U.S., they often require specialty insurers which can be costly and hard to find. Nonprofits are also often targets for cyberattacks and face unique underwriting processes that differ from other industries. The industry most impacted by inflation and unfavorable market conditions is the hospitality and casino industry where we expect to see increases in rates, reduced insurer options, and stricter underwriting processes across cyber, employment practices, general liability, property and umbrella.

In wake of recent natural disasters, what’s the outlook for property insurance underwriting and rates? On a practical level, what should buyers expect?

Property rates remain high and are expected to remain high for a while. Hurricane Ian caused big disruptions for property reinsurers, who in turn are pushing carriers for better valuation and stricter underwriting — especially in catastrophe-prone areas. As for how this will realistically play out, buyers may see fewer coverage options and new requirements like recent appraisals, insurance-to-value increases, engineering reports and complete applications. More underwriting processes will also focus on fire suppression systems, difficult-to-place risks and limits on high-rise structures.

According to Alera Group’s P&C Market Outlook, cyber liability pricing is expected to increase by 15% in 2023. What do you think this says about the market and what can organizations do to control their spend?

The cyber market is still relatively young and new risks can emerge quickly. Although rates are expected to increase by 15% on average for the simpler risks in 2023, more complicated cyber risks will see increases as much as 50%, often with difficult underwriting processes. Terms and conditions are changing to better clarify challenging coverages, resulting in longer underwriting processes. Employers and buyers of cyber insurance should ensure they are working with experienced underwriters and that they properly understand the specific cyber risks associated with their business so they can prioritize coverage selections.

Are there any emerging P&C lines that will take the spotlight in the years to come? What about in the captive space?

I cannot say for certain we will see completely new lines of business emerge in the next few years in the P&C market. But I do expect to see changes in coverage within different lines of business, particularly as our economy evolves and new technologies and products are utilized by both individuals and commercial industry. Artificial intelligence and other product innovations are expected to have an impact on both frequency and severity of loss outcome and will influence actuarial pricing indications for various insurance products.

I think captives will continue to emerge as a critical part of the ecosystem. As coverage capacity in lines like commercial property goes down or as new risks emerge in lines like cyber, captives offer organizations new options for layering the coverage they need at a price that truly reflects their own loss history and level of exposure. Captives are able to fill in the coverage gaps in cases where the commercial market has yet to come up with a competitive solution. This happened for cyber risks about a decade ago.

How are actuaries poised to help organizations and risk managers tackle some of the challenges mentioned?

Actuaries specialize in quantifying risks using statistics, whether for a business or an insurer or an entire industry and using that information to manage risks in a cost-effective way. This runs the gamut from reviewing a company’s loss history and current insurance policies to informing better choices in the commercial insurance market, all the way to setting up a captive insurance company tailored to the needs and experience of a specific business. In an environment like today with rising premiums and reductions in capacity and coverage options happening for many P&C lines, actuaries can provide organizations with tools and a higher level of confidence around managing their risks and their costs effectively. As an example, actuarial proforma financial models can be leveraged in a captive solution and aid a company’s decision-making around the appropriate balance between retaining risk and utilizing available market options to transfer risk in a cost-effective way.

The pandemic had certain influences on insurance underwriting. Have we transitioned past these pandemic issues yet?

Court room closures, significant reductions in vehicles on the road, delayed healthcare surgeries and procedures and other changes at the onset of the pandemic had a big impact on the underwriting experience of insurance companies for most property and casualty lines of business. As one would expect, when our economic engine slows the frequency of claims also does. As we are now well past these issues and our economy is mostly back up and running, we are now working through other, likely temporary issues that are currently impacting the underwriting experience within the commercial market and driving the need for rate increases. We are certainly seeing this in the auto insurance market. After over a decade of low treasury yields and a low inflationary environment, we are now in a high inflationary environment for personal lines auto. Supply chain issues during the pandemic resulted in significant increases in vehicle costs and have resulted in rising auto claim severities and the need for auto rate increases in the market.

Any final thoughts on the P&C landscape?

It’s a difficult year for property and auto costs, and cyber risks continue increasing. Some of the bottom-line impacts of these changes are unavoidable, but rate and coverage changes in the commercial insurance market are also driven by broad industry patterns that might not apply to a specific organization. I expect to see more businesses taking a close look at their own risk profile and exploring all of their options to close coverage gaps and take advantage of alternative risk funding structures when appropriate.

1 Alera Group’s 2023 P&C Market Outlook
2 https://wusfnews.wusf.usf.edu/economy-business/2022-12-01/hurricane-ian-is-expected-to-drive-more-property-insurers-out-of-business
3 https://www.businessinsurance.com/article/20230104/NEWS06/912354660/Some-rates-will-stabilize-less-optimal-risk-profiles-will-see-hikes-
4 https://www.climate.gov/news-features/blogs/2022-us-billion-dollar-weather-and-climate-disasters-historical-context
5 S&P Global Market Intelligence, March 2023

Background

With terms like “quiet quitting”, the “great resignation”, and “burnout” becoming regularly intertwined in our vernacular, attracting and retaining key talent has never been more nuanced. Since benefits priorities and expectations are constantly shifting, validating the benefit offerings through competitive benchmarking may be the most important tool in an employer’s arsenal.

At its core, benchmarking is a process of measuring or comparing against certain indicators, industry standards, or best practices. It is used to evaluate various aspects of the program and develop plans to improve upon the current state. Benchmarking can yield actionable insights, enhance your metrics standards (e.g., what constitutes success), enable you to build a business case for change, or defend the current process and programs available.

Types of Benchmarking

Performance benchmarking, one of two main types of benchmarking, uses quantitative data and measures to inform decision-making and business cases for change. Practice benchmarking, the other main type, is more qualitative in nature. It focuses on how an activity is conducted through people, processes and technology and provides insight into gaps and best practices that could be applied. Both play a critical role in comparing employee benefit programs and should be used in tandem.

Each of these can involve internal benchmarking, where the comparison is made against your own data over time, either in the aggregate or by different business units, product lines, departments, programs, geographies, and the like. They can also entail external benchmarking, where metrics or practices of your company are compared to one or many other companies. This involves external sources or custom surveys and provides an objective understanding of current state. External benchmarks are necessary to validate your offering remains competitive in the market; however, internal benchmarks are imperative to track against previously set metrics and targets.

Your vendor partners, including insurers, coalitions, trade organizations and benefit advisors (i.e., Spring / Alera), can typically support the demand for external benchmarking.

Getting Started

The good news is that you may be better positioned to begin benchmarking than you think.
We recommend the following roadmap for effective benchmarking:

  1. Define Your Objectives
    1. Roles and responsibilities
    2. Timeliness
    3. Metrics for success
  2. Determine Your Data Gathering Strategy
    1. Understand definitions and what you are trying to measure
  3. Identify Data and Tools You Have Available
    1. What tracking tools are at your disposal in-house or through partners
    2. What data is available internally
    3. Consider supplemental sources of information
      • Insurance carriers
      • Third party administrators
      • Brokers, Consultants and Advisors
      • Benefit associations
      • Research firms
  4. Organize Results Into Actionable Reports
    1. Identify areas where change is needed
    2. Use results to provide support in business case to C-suite / upper management
  5. Continually Monitor
    1. Benchmarking is most successful when it is not a one-and-done activity, but rather a regular business activity, as the benefits landscape is always changing. Further, if your benchmarking results bring about a change in policy or protocol, you want to be sure you are prepared to measure whether that change yields the intended result.

There are many different areas of benefits an organization can benchmark, from health plan design to retirement benefits and disability insurance. If you are unclear about where to start, consider where your biggest pain points exist and consider those the highest priorities. If significant pain points do not exist, benefit plan design is usually an optimal place to begin benchmarking as process details hinge on plan design.

As employers fight for top talent and work to deliver equitable benefits, family-first benefits have risen to the top of the priority list for most progressive employers, but the definition of family first continues to evolve. An increase in parental and caregiving leave, use of lifestyle accounts, coverage for family planning and infertility including at times travel reimbursement demonstrates an employers’ commitment to their diverse population and the constantly changing definition of family friendly. Women’s health, however, during and beyond childbearing years, is beginning to take center stage.

In recent years, the stigma around infertility and reproductive health issues has lessened. The CDC reports that around 19% of American women struggle to get pregnant. In vitro fertilization (IVF) can cost between $15,000 – $30,000 per cycle without insurance, and surrogacy costs range from a staggering $100,000 – $200,000.1 Given the expense as well as the physical and mental toll of reproductive challenges, employers and lawmakers responded, with almost half of U.S. states requiring fertility insurance coverage. Most of these laws require benefits be provided for the diagnosis and treatment of infertility, as defined by the state. Many require IVF to be a covered benefit for plans that provide pregnancy-related benefits, while others may only mandate that insurers offer coverage options related to infertility for employers to select.

Under these fully insured plans, some restrictions apply and requirements must be made for coverage. For example, coverage may be restricted by various clauses such as the definition of infertility (i.e., 2-year history of infertility, infertility associated with certain conditions such as endometriosis, etc.), lifetime maximums (e.g., $15,000), and approved treating providers. Further, laws may only apply to certain plans, such as those with more than 100 lives.

In Massachusetts, for example, all insurers who provide pregnancy-related benefits must provide coverage for the diagnosis and treatment of infertility, including artificial insemination, IVF, Gamete Intrafallopian Transfer (GIFT), egg banking, and more. Infertility is defined by being unable to conceive during a period of 1 year if the female is 35 or younger, or during a period of 6 months if the female is over 35. There is no legal limit on a number of treatments, however, insurers may set limits based on clinical guidelines and patient medical history.2

Although states with fertility insurance laws often provide a minimum level of coverage, many employers are not subject to those state requirements (i.e., self-insured plans). Therefore, employers must make critical decisions surrounding plan design for infertility or alternative family planning benefits. This analysis should include benchmarking against peer groups to ensure the offering is competitive as well as a cost-benefit analysis to account for the additional spend.

The healthcare system for women’s health is fragmented. The healthcare lifecycle for women is centered around one life stage – childbearing – during which years healthcare spend is considerably higher than for male counterparts (i.e., ages 19-44).3 However, women are experiencing poor outcomes across many health metrics.4 In addition, many women do not feel heard by their healthcare provider, especially women of color who experience considerable disparities in care and health outcomes. 

Spring would encourage employers to think about women’s health as a priority and begin to track metrics against standards (i.e., preventive services, primary care, etc.). Thinking about women’s health without infertility at the center is important. Consider creative services around birthing (i.e., doula services), support postpartum (i.e., breast milk storage and shipping), and movement into menopause support. Perhaps most critical is working to support women seeking care and ensuring their voices are heard, a pivotal component in bettering health metrics for women.

1 https://money.usnews.com/money/personal-finance/family-finance/articles/how-much-surrogacy-costs-and-how-to-pay-for-it
2 https://resolve.org/learn/financial-resources-for-family-buildinEmg/insurance-coverage/insurance-coverage-by-state/
3 https://www.healthsystemtracker.org/chart-collection/health-expenditures-vary-across-population/#Average%20individual%20health%20spending,%202019%C2%A0
4 https://hologic.womenshealthindex.com/en

Background

With Ozempic in particular capturing headlines, a new generation of weight loss prescription medications have gained recent traction. According to the National Institute of Diabetes and Digestive and Kidney Diseases, more than 42% of American adults are obese or severely obese, a rate that has almost doubled since 19801. Although we remain a society hyper-focused on pant size, the potential health benefits of these medications should not be ignored.  

The World Health Organization (WHO) reports that four million people die each year from underlying conditions related to obesity. Obesity has been known to increase your risk of developing type 2 diabetes, hypertension, cardiovascular disease, kidney disease, stroke, sleep apnea, osteoarthritis, and certain types of cancer, and can extend beyond the physical realm to negatively impact mental health as well2.

As employers and the nation work to combat soaring healthcare costs, obesity could be a critical piece of the puzzle since medical costs for the obese tend to be 30%-40% higher than those with a healthy weight3. A study by Xcenda estimates that if obesity rates in the U.S. were 25% lower, we would see a 115% decrease in IUC admissions and deaths related to COVID-194.

We all know that losing weight is not as simple as it sounds. In addition to your average obstacles, social determinants of health such as income, education, location, and food insecurity, as well as genetics and hormones play big roles in the obesity equation and should not be minimized. Although a magic pill rarely exists, it is possible these new drugs could be perceived by some as magical.

To sprinkle some of that magic without too much smoke and mirrors, employers can ensure their health plan and Pharmacy Benefit Manager (PBM) partners have the right policies and eligibility criteria in place to ensure these medications are available for the right people.

The Basics

Two drugs, Wegovy (semaglutide) and Saxenda (liraglutide) both manufactured by Novo Nordisk have FDA indications for weight loss. Trials for Wegovy and Saxenda produced 15% and 5-10% average weight loss results, respectively5. Although positive, the sample is small, and the long-term impact is unknown. Novo Nordisk’s marketing campaign created a frenzy, resulting in a national shortage of the drug. In 2022, Wegovy prescriptions increased by 284%6. The demand is so high, in fact, that Novo Nordisk is now prioritizing the limited supply to existing patients, making it harder for new patients to start the medication. Saxenda (liraglutide), which hit the market in 2015 experienced success, but preference has since shifted to Wegovy due to its once weekly injection and more robust weight loss potential.

Ozempic (semaglutide), also produced by Novo Nordisk, and Mounjaro, through Eli Lilly, are both currently approved for diabetes but are seemingly being used off-label for weight loss. Industry leaders believe Mounjaro, which is said to give off an even stronger fullness signal and reports even more weight loss than Wegovy.  The initial results are positive with favorable weight loss in 80% of patients taking Mounjaro and average weight loss at 15%, based on information from The New England Journal of Medicine. It is expected the drug will be approved for weight loss later this year.

Side effects for these drugs do exist, although relatively mild, include nausea, vomiting, diarrhea and acid reflux. The good news is that that with time these side effects typically subside. Patients may also experience pain at the injection side, dizziness, or fatigue. There is a general warning with the GLP-1 receptor agonists drugs regarding the risk of thyroid tumors7 in specific populations. Individuals should work with their physician to evaluate their appropriateness for the drug.

Contrave is another weight loss drug produced by Orexigen Therapeutics that was approved for weight loss in the U.S. in 2014. Contrave is approved for people with obesity (a body mass index of 30 or more, or of 27 or higher with at least one weight-related condition). Contrave, an oral tablet, is a combination of two active ingredients, naltrexone and bupropion, which together work to suppress appetite and increase the feeling of being full after eating. Clinical trials report that Contrave can lead to a loss of 4%-8% of body weight. Similar Rx benefit policies and restrictions are in place but provide an alternative to patients.

Many medical experts recommend long term therapy for patients but with evidence still emerging recommendations are changing quickly. It has been reported that most people gain the weight back after stopping8 which would likely result in an endless cycle.  While these drugs do yield hope, they still are not a silver bullet, and ideally would be one piece of a comprehensive health betterment plan that also focuses on healthier eating and exercise habits9.

The Numbers

These medications have high price tags with Wegovy retailing at approximately $1,300 a month and lack of coverage without strict prior approval criteria. Even with the high price tag, some patients are willing to cover the cost out of pocket and can find manufacturer programs to offset some of their costs. This industry has a projected market value of approximately $100 billion in less than ten years. Reuters reported on March 29, 2023, that WHO is considering adding obesity drugs to their ‘essential’ medicines list, but this remains to be seen.

If we know that obesity rates are linked with environmental, generic, and social determinants of health, only a tiny piece of the epidemic can be mitigated with these drugs which does not serve as an equitable solution. In that vein, we are keeping our eyes on the proposed bill entitled the Treat and Reduce Obesity Act, which could alter insurance requirements for obesity treatments like these, but carriers may hold out until long-term effectiveness can be proven.

It is worth nothing again that only Wegovy, Saxenda, and Contrave are currently authorized for weight loss alone, but there is evidence that other versions of the drug (i.e. Ozempic and possibly Mounjara) are being used off-label for weight loss by non-diabetics.

Employer Considerations

As I mentioned, many insurance carriers only cover medications in this category in the case of diabetes. However, a survey conducted by the International Foundation of Employee Benefit Plans (IFEBP) states that 22% of employers in the U.S. cover prescription drugs for weight loss, and 32% offer weight management programs. This is driven by the fact that 25% of employers report obesity as the largest detriment to healthcare costs.

Given this, it’s likely important for employers – at least self-insured employers – to consider a formal but flexible policy related to weight loss medication as research evolves.  A thoughtful program must consider all options available and pinpoint if these medications will positively impact your population and plan costs.  A comprehensive policy will likely require prior authorizations, potential lifetime maximums and perhaps coverage in collaboration with other treatments (i.e. nutritionist, diet programs, workout routines, etc.).  In addition, coordination with your pharmacy benefit manager will be critical to ensure you can take advantage of competitive pricing and rebates where appropriate.

Conclusion

Excess weight can take a hefty toll on a person’s body and mind. It can lead to serious health conditions which can lead to premature death, substantial disability, and/or negatively impact memory and mood. The fact is that obesity diminishes almost every aspect of health and the charge to “lose weight” or “maintaining a healthy weight” is frankly daunting. It is also very frustrating that the high costs of these medications are often cost prohibitive for many and inappropriate prescribing does not help our efforts to “reign in” pharmacy costs.

As employers we must look at the entire picture; both short- and long-term goals and educate ourselves on what coverage really looks like with our medical and PBM partners. We have a responsibility to ensure they have criteria in place to closely monitor authorization and utilization of these medications so to ensure the right person has the right drug at the right time and continues to benefit from it over time. Spring is happy to be the conduit for your organization in analyzing population health data, evaluating coverage options, ensuring the appropriate protocols are in place, and working with your PBM to build a strategy for prescription weight loss drugs into your larger benefits program.

1 Obesity Statistics. The European Association for the Study of Obesity. 
2 https://www.webmd.com/diet/obesity/obesity-health-risks
3 Public Health Considerations Regarding Obesity. StatPearls
4 https://galen.org/2023/new-treatments-for-obesity/
5 https://www.nbcnews.com/health/health-news/weight-loss-drug-affordability-rcna60422
6 https://www.usatoday.com/story/news/health/2023/03/22/ozempic-wegovy-mounjaro-weight-loss-medications-explained/11510967002/
7 https://www.npr.org/sections/health-shots/2023/01/30/1152039799/ozempic-wegovy-weight-loss-drugs
8 https://dom-pubs.onlinelibrary.wiley.com/doi/10.1111/dom.14725
9 https://www.hsph.harvard.edu/obesity-prevention-source/obesity-consequences/health-effects/

The U.S. is one of the only countries in the world without a federally mandated paid parental leave policy. This gap has motivated many states to take matters into their own hands, creating their own statewide paid family and medical leave (PFML) laws, which typically include parental leave (bonding with a new child) but also additional absences from work due to common life events such as a serious illness or to care for a sick family member. Similarly, individual companies often have their own parental leave offerings, knowing that it is critical to a successful employee attraction and retention strategy. 

In years past, the focus was on the mother’s access to maternity leave, and any paternity leave offered was perceived as a “bonus.” However, modern assessments of equity and discrimination should have employers reassessing how their parental leave programs are framed, especially given guidance recently released by the Equal Employment Opportunity Commission (EEOC).

What You Need to Know

Parental leave is a key example of how employers can ensure they are putting their diversity, equity, and inclusion (DEI) values to work. Recent guidance, legislation, and general buzz around this topic make it a prime time to ensure that your programs are compliant. Please get in touch if you should have any questions about leave laws or best practices in this area.

This World Health Day, we’re reflecting on COVID-19, which flipped our worlds upside down and took over our thoughts and behaviors for a long time. We can think about the “before” times, when perhaps we didn’t even own a mask, didn’t think twice about a handshake, and never missed a wedding or family gathering. Now, we are entering the “after” times, whether we’re ready or not the COVID-19 National Public Health Emergency is scheduled to end on May 11th. For many, COVID-19 protocols are a thing of the past, but while we can all resonate with the urge to move on, “long-haulers” may feel left behind.

The hard facts on Long COVID remain hard to pin down. New Hampshire’s WMUR9 news station reports that between 16 and 35 million Americans have contracted Long COVID, leaving an estimated 4 million Americans unable to work, at least for a period of time. In an NBC News analysis of data reported from the Census Bureau, 11% of those surveyed who had ever contracted COVID-19 were actively suffering from long COVID in February 2023, which was down from 19% in June of 2022. Medical experts estimate that the likelihood of coming down with Long COVID is around 5-10% for those fully vaccinated and 15-20% for the unvaccinated1. Certain demographics may be more vulnerable; a review in the journal Nature indicates that women and people with Type 2 diabetes or ADHD may have an elevated risk of contracting Long COVID.

Regardless of exact numbers, employers should not lose sight of Long COVID, which could leave a significant portion of its workforce with brain fog, respiratory problems, depression, or other symptoms that make it difficult to do their day jobs. While we do seem to be moving in the right direction in terms of quantity of diagnoses, we all know that the prevalence of COVID can ebb and flow, and that no two cases seem to be the same. We recommend having open and frequent dialogues with employees who report Long COVID debilitations, as you may be able to make accommodations or assist in identifying the resources they need. Understanding if and how your leave, sick, and disability plans account for Long COVID is also important. In some cases, a severe Long COVID symptom could result in a disability covered in your short-term disability plan, or an employee may be eligible for leave under the FMLA or other applicable program. For employees dealing with Long COVID, knowing that they have options to either take leave, adjust their job requirements or schedule, or generally receive support can go a long way.

Watch the recording of our webinar, Why Long COVID Needs Short-Term Attention, where we dive deep with a pulmonologist on the state of Long COVID and offer employers strategies to mitigate what could be long-lasting affects on claims costs and workforce productivity.

1https://www.nbcnews.com/health/health-news/current-risk-getting-long-covid-rcna73670

Our Managing Partner, Karin Landry will be presenting at The Connecticut Captive Insurance Association (CTICA)’s webinar titled “How to Level Up Your Medical Stop-Loss Program” later this April. You can learn more about her presentation here, and register here.

Background

According to Pharmacy Times, between July 2021 and July 2022, more than 1,200 medications had a price increase that surpassed the inflation rate during that time of 8.5%, with the average increase across these drugs coming to a staggering 31.6%. Overall prescription drug spending is projected to rise at an average annual rate of 6.1% through 2027.

Why are we seeing this uptick? An aging population, healthcare services costs, and administrative costs (e.g., financial transactions and patient services) are likely partly to blame. There are a range of strategies and tactics to help combat rising pharmacy costs within your benefits program, but it is important to understand what is driving these costs both globally and specifically within your organization. There is much talk about the skyrocketing costs of specialty medications. Specialty medications are now responsible for over 50% of total pharmacy costs, yet only about 2% of the population is using them.1 Unfortunately, a significant portion of pharmacy spend is going towards innovative and/or targeted therapies that treat rare, complex, genetic or inherited diseases, and cancer – all of which are usually beyond our control.

Preventing the Preventable

On the other hand, however, there are several behaviors that have a strong influence on health outcomes: tobacco use, alcohol consumption, physical activity, and diet.6 A direct correlation between cigarette smoking and the risk of heart disease has been shown and it is in fact the single most important modifiable risk factor for heart disease. Cigarette smoking has also been linked to certain cancers, which is the second leading cause of death in the United States. In fact, 16 million Americans have at least one disease caused by smoking, costing over $240 billion in healthcare costs annually.1 

Obesity has been linked to multiple chronic diseases including heart disease, diabetes, and musculoskeletal conditions impacting bone health. The Centers for Disease Control and Prevention (CDC) reports that obesity adds another $173 billion worth of burden on the healthcare system per year because of resulting complications. Several studies have documented the adverse cardiovascular health effects that plague overweight adults. This is partly because obesity adds increased demands on the heart to supply blood to the body.  Excess body weight and obesity are linked with an increased risk of high blood pressure, diabetes, heart disease and stroke. Losing as little as 5 to 10 pounds can make a significant difference in your risks. Even if weight control has been a lifelong challenge, taking small steps today can go a long way.2

Diet and physical activity are behaviors that directly influence weight. However, they may also have direct effects on diseases.

Wellness interventions provide an opportunity for us to have some control over the healthiness of our workforce. These interventions play an important role in moving the needle by working to solve for the root causes at play. Employers should be incentivized to implement these preventative programs not only because wellness programs are considered as “nice perks” that increase employee morale and productivity, but also and more importantly, they are tangible solutions that can reduce the burden of health and pharmacy costs. If less employees need prescription drugs in the first place, pharmacy spending could decrease dramatically. Seems easy, right?  

Let’s Get Tangible: Wellness for Outcomes

The higher the risk factor prevalence within a population, the greater healthcare costs are likely to be, both within the pharmacy realm and overall. Therefore, wellness initiatives targeted towards combatting, reducing, or preventing these risk factors will have a more tangible impact on reducing costs and improving health outcomes.

A Targeted Approach

There are six key lifestyle behaviors that promote a long and heathy life3:

The goal is to reduce the need for prescription medication by stopping problems before they even exist. In a study of 55,000 people, those who made healthy lifestyle choices such as avoiding smoking, eating healthy, and exercising lowered their heart disease risk by about 50%.4 In fact, unhealthy lifestyle behaviors such as those that oppose those listed above cause approximately 70-90% of chronic diseases, which yield up to 75% of total healthcare spend in the U.S.5 As such, when it comes to medical and pharmacy costs, the most successful wellness programs  will be those aimed at those six pillars and affecting long-lasting behavioral changes.

Wellness Point Solutions

The good news is, the wellness industry awakened with this realization a decade or so ago, in the midst of out-of-control healthcare costs, and now there are a plethora of wellness companies and tools available for employers to leverage. In fact, in the U.S., the wellness industry represents $1.2 trillion in revenue6. Homing in on the six behaviors above, employers might consider the following*:

A range of wellness point solutions are out there, and the all-encompassing ones will have tools pointed toward all six of our wellness pillars. Additionally, larger employers have started to introduce onsite health clinics and resources to make employee engagement in their health more convenient. Some incentivize through walking or step challenges. Health plans build in wellness incentives such as reimbursements for gym memberships. Whatever it looks like, introducing preventative measures that lessen the prevalence of disease and poor health outcomes; reduce the need for prescription drugs, lost work days, and absence from work; and improve mental health; can lessen overall healthcare costs and prove advantageous for your workforce.

Before you make any decisions around wellness solutions, be sure to understand what is driving your pharmacy spend within your own organization. We recommend working with a consultant or actuary to take an unbiased and robust view of your data. Better yet, consider taking the next step to…

Work With a Clinical Pharmacist

Even the best wellness programs cannot prevent or reverse existing and/or genetic health problems within a workforce population, and there are times when prescription medications are necessary. Typically, a clinical pharmacist is not part of your health benefits team, weighing in on strategy and dissecting the needs of your workforce population. I firmly believe this is both a gap and an opportunity.

An experienced clinical pharmacist can look at the full array of options available through a different lens, putting all the pieces together (medical, Rx, wellness, etc.) and provide targeted recommendations to improve outcomes while controlling costs.

Another important role of a clinical pharmacist is the ability to recognize signs of medication non-adherence, which can cause disease progression and adverse outcomes. If your organization is spending money on prescription drugs that are not being taken correctly and therefore cannot have the intended effect(s), a pharmacist can flag that up.

Get in Touch

When it comes to healthcare and pharmacy costs, many of the factors involved are out of our hands. However, we do have some power to affect change and take control through preventative, wellness, and innovative and targeted pharmacy solutions. Given the current climate, why wouldn’t we aim to do so?

If you need assistance assessing your current wellness programs, navigating the marketplace of vendor solutions, conducting a Request for Proposal (RFP), auditing your pharmacy benefits contract terms and utilization data, or are interested in leveraging a clinical pharmacist to yield customized and impactful results, our team would love to chat with you.

*Please note, Spring’s intent is neither to promote nor recommend any of these specific solutions, but rather to portray a snapshot of what is available in the market.

1https://www.wellsteps.com/blog/2020/01/02/benefits-of-wellness-lower-health-care-costs/
2https://www.stroke.org/en/about-stroke/stroke-risk-factors/risk-factors-under-your-control
3https://www.verywellhealth.com/lifestyle-factors-health-longevity-prevent-death-1132391
4https://www.health.harvard.edu/blog/lifestyle-changes-to-lower-heart-disease-risk-2019110218125#:~:text=The%20good%20news%20is%20that,disease%20risk%20by%20nearly%2050%25.
5https://www.wellsteps.com/blog/2020/01/02/benefits-of-wellness-lower-health-care-costs/
6https://www.zippia.com/advice/health-and-wellness-industry-statistics/#:~:text=Here%20are%20some%20statistics%20about,products%20is%20about%20%24168%20billion