The impact of a national drug savings program on a reinsurance company
Michael Reagan, CBPA
Prescription Drug Savings | Making all FDA-Approved Medications More Affordable for Organizations & Individuals | A Practical, People-First Solution that Makes a Daily Impact in Our Subscribers Lives | Enjoys Traveling!
The impact of a national drug savings program on a reinsurance company, focusing on specific stop-loss and aggregate stop-loss, can be profound. Here are some considerations:?
Specific Stop-Loss Impact
1. Lower Claim Frequency: If a national drug savings program significantly reduces the cost of high-priced medications, the frequency of claims hitting the stop-loss level ($40,000) will decrease.
2. Reduced Severity: The severity of claims that do hit the stop-loss threshold may be reduced, as treatment and medication costs decline.
Aggregate Stop-Loss Impact
1. Lower Aggregate Claims: National savings on drug prices can reduce the overall claims, thus lowering the chances of exceeding the aggregate threshold (110% of expected claims).
2. Premium Adjustments: Reinsurers may adjust stop-loss premiums based on lower projected aggregate claims, leading to potential savings for their clients.
Supporting Studies and Reports
1. Milliman Research: Milliman’s studies on the implications of drug pricing reforms suggest substantial cost savings for insurers, which would directly benefit reinsurers through decreased liability.
Source: Milliman "Potential Effects of Prescription Drug Price Controls", 2021.
2. Society of Actuaries (SOA): SOA’s research indicates that national drug pricing reforms could lead to a reduction in the per-member-per-year (PMPY) costs, affecting both specific and aggregate stop-loss insurance.
Source: Society of Actuaries Research Brief, 2020.
3. Deloitte Insights: Deloitte's analysis on long-term drug cost trends highlights that significant regulatory changes in drug pricing can lead to sustainable reductions in healthcare costs.
Source: Deloitte “Healthcare and Life Sciences Predictions 2025”, 2021.
Model Projections
Using actuarial models considering a 10-20% reduction in medication costs:
Specific Stop-Loss:
?- Expected decrease in claims reaching the $40,000 threshold by approximately 5-10%.
?- Lower premiums for clients due to reduced risk.
Aggregate Stop-Loss:
?- Reduction in total claim values leading to fewer instances where the 110% threshold is exceeded.
?- Potential re-evaluation of aggregate stop-loss thresholds based on new claims data.
Conclusion
A national drug savings program is likely to reduce both the frequency and severity of high-cost claims, positively impacting reinsurance companies by lowering the claims they need to cover and adjusting premiums accordingly.
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For more information:
Michael Reagan 214-850-1069 [email protected]?????????????????????????????????????????????????????????????????????????????????? Randy Wright 770-654-8499 [email protected]