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Premium Allocation
Industry standard suggests that health insurers allocate a minimum of 80% of premium revenues to claims, and this percentage can increase to 85% for larger organisations who insure 50 employees or more. In Bermuda, the US and the wider Caribbean, the standard is to follow this guideline. Administrative costs consume about 10-12% of premiums, with the remainder contributing to profit. Private health insurers in Bermuda are stringently regulated by the Bermuda Monetary Authority and the Bermuda Health Council.
Rising premiums reflect the increasing costs of honoured claims. This includes the number of claims, average costs, and demographics affecting group premiums. Cost drivers we have observed over the past three years include the high price of specialty drugs, influenced by advancements in medical treatments and supply chain issuesi, and prescribing patterns that can impact costs significantly. Yet, challenges like the rising cost of prescription drugs and the logistics of overseas care cannot be tackled in isolation. They require strategic thinking and cross-sector collaboration.
Prescription drugs and Prescribing patterns
Supply chain challenges and high-cost drugs entering the market have resulted in increased prescription costs for both brand-name and generic drugsii. While the remarkable advancements in Specialty and Biologic Drugs have significantly improved treatment options for patients with chronic conditions, these advancements can come at a considerable cost – double-digit percentage rises quarter-over-quarteriii.
Additionally, prescribing practices also have a bearing on cost, notably with FDA-approved weight loss drugs. While an effective tool in addressing obesity, their long-term impact and cost sustainability remain unclear. What we do know is that they have the potential to remain a significant cost driver due to widespread use, without controls.
An approach Argus has operationalised is Step-Up Therapy, which promotes the use of affordable drugs before graduating to more expensive treatments. While this solution involves an additional administrative step, it allows for collaboration between the patient, pharmacy, and provider to ensure that drugs are prescribed appropriately and obtained at the best price. Additionally, for certain conditions, there is growing evidence that first prescribing at the highest drug tier has clinical value in slowing disease progression, which can have significant cost implications. There is a clear opportunity to further explore how pharmacy benefits can be better coordinated, starting with improving how pharmacy data is exchanged and supporting physicians in balancing clinical effectiveness with prescribing the most cost-effective medications.
Local Accessibility and Overseas Care
Over the last three years, certain elective, non-emergency treatments and surgical procedures like cataract surgeries and joint replacements are now being directed overseas due to prolonged local wait times.
Procedures normally covered under the Standard Health Benefit are being outsourced to overseas providers and billed through Major Medical coverage. This has created a new dilemma where residents are paying more for healthcare services once covered locally. These overlapping charges include additional travel and accommodation costs.
It is essential to focus on repatriating services and leveraging access to new gateways to improve the patient care experience. One Team Health (OTH), our Toronto-based third-party overseas care administrator, a company we acquired in 2019, has been instrumental in finding solutions for the persistent challenges of cost containment and access to high-quality, care providers. OTH actively collaborates with our local Population Health Management team to act on these opportunities.
Covid-19 Rebound and Chronic Conditions
The pandemic has escalated the demand for previously deferred healthcare services, and as demand increases, so do prices, placing additional pressure on the healthcare system.
Industry-wide, the rebound is compelling insurers and healthcare providers to implement robust health management programmes. In 2020, Argus acquired two medical practices — Island Health Services and the Family Practice Group. This strategy enables Argus to assume responsibility, not only for insurance coverage, billing, and reimbursement, but also for care delivery. By including medical practices as part of our service delivery model, we’ve aligned the interests of doctor, insurer, and patient with the common goal of achieving better health outcomes at a more affordable cost. Argus and the practices are together implementing a policy change to remove the financial barriers to preventive and chronic care — all Argus members will receive no co-pay for GP and specialists’ services, including annual physicals.
Chronic conditions like diabetes, hypertension and obesity represent a significant portion of our healthcare expenditure. Supporting patients with practical, personalised advice on living well with these conditions is essential for reducing the risk of secondary complications. Our Diabetes Rewind Programme (DRP) helps patients make long-term diet and behavioural changes through a support network of expert clinical guidance and digital health tools. This is a free service to our members, with no co-pay. During the first four cohorts, we have seen participants lose weight, improve their health and take fewer days off work. There are more than 8,000 people in Bermuda with type 2 diabetes that could benefit from this holistic approach.
Our Advocacy
Our distinct path at Argus mirrors the global aspiration to achieve better value for healthcare spend with a keen focus on member engagement. As the largest health insurer on the island, we have a vested interest in ensuring healthcare remains affordable.
By prioritising preventive measures, benefits education, and managing chronic conditions more effectively, we're investing in the well-being of our community. These efforts aim to counteract the healthcare inflation trend and improve accessibility to quality care.
But it’s not about pouring more funds into the system; it’s about rethinking healthcare infrastructure and supporting more efficient, collaborative care to achieve universal coverage with the goal of a more sustainable approach to spending.
Reference Links
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https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html#:~:text=Inflator%3A%20Increasing%20cost%20of%20pharmaceuticals&text=Combined%20with%20the%20accelerated%20approvals,double%20digits%20from%202023%2D24.
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https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6033752/#:~:text=Consequently%2C%20top-down%20therapy%20can,early%20combined%20(early%20use%20of
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Argus Health Claims Data for the Policy Year 2023-3024