Health Care Spending

By Kristen Smithberg

What You Need To Know

• Individuals with significant chronic and comorbid conditions drive a disproportionate percentage of the health care dollars.

• One percent of enrollees account for 29 percent of spending at an average annual cost of $206,000 per person.

• 61 percent of all enrollees in employment-based health plans have at least one chronic condition. Individuals with significant chronic and comorbid conditions drive a disproportionate percentage of the health care dollars spent by employers on workplace-based health care benefits. High-cost claimants account for about 20 percent of participants but about 80 percent of spending, according to an EBRI fact sheet.

“This matters to employers, who have spent decades trying to control rising health care costs,” EBRI said. Employers have tried changing plan designs, shifting cost sharing and exploring new delivery methods for care, but despite these efforts, the cost of providing health benefits has outpaced inflation almost every year for the past 40 years.

Because spending data is often highly skewed, it is important to consider median spending rather than just mean spending when designing effective health policies, said the report.

EBRI’s analysis notes that the 80/20 rule masks nuances in the data. For example, the 20 percent of the population that accounts for 80 percent of health spending are not necessarily high users, said the report. Their average annual spend among that group is $30,000, but median spending is only $15,000 and some people use as little as $6,000 in health care per year.

Related: Large employers are driving a shift in health benefits to control costs.

“This raises a question as to what the threshold should be to define someone as a high-cost claimant or a high user of health care services,” said EBRI.

The research reveals that one percent of enrollees actually accounts for 29 percent of spending at an average annual cost of $206,000 per person. Five percent of enrollees account for 57 percent of spending, while 10 percent account for 71 percent of spending, and the top 20 percent account for 84 percent of total health spending. Essentially, that means most employees use little or no health care in a given year.

Chronic conditions play a significant role in increasing health care usage and spending.

Chronic conditions play a significant role in increasing health care usage and spending. Sixty-one percent of all enrollees in employment-based health plans have at least one chronic condition, and total spending for these enrollees represented 92 percent of health care spending in these plans. Among the most common conditions were respiratory disease, heart disease, musculoskeletal disorders, skin disorders, mental health disorders and diabetes. About 4 percent had complex conditions such as liver disease, AIDS, or dementia.

Kristen Smithberg is is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.