(651) 348-6928 BradQ@DuNordRe.com

The use of weight loss drugs like Wegovy is expanding rapidly. The March 29th edition of the Wall Street Journal reported that Elevance and Kaiser Permanente are expanding their coverage for people with heart-related conditions for Medicare Advantage and commercial plans. While not a blanket approval, it may be the “nose in the tent” that leads to rapidly expanding usage.

It appears some large health plans may believe it is better to pay $14k—$16k annually for Wegovy than to have a major heart event. If the major plans cover GLP-1 drugs, will smaller plans be far behind?

How could this impact health plan claims and trend? One would assume the large plans are paying for Wegovy to avoid high claim events. However, the cost of a large claim may simply be spread out over more time, resulting in a higher general trend but potentially slightly fewer costly heart-related claims.

How would increasing general trend drive your reinsurance costs higher? Will having fewer heart claims hold reinsurance costs down? The answer, as often in health insurance, is that it depends. Reinsurers divide renewal calculations into two components: manual and experience. The manual trend is driven by large blocks of data to predict the frequency and severity of high claims. Experience underwriting looks at a health plan’s experience through the lens of general medical trend. That general trend is likely to be impacted by Wegovy and other weight loss drugs. 

How your renewal is split between manual rates and experience depends on the reinsurer, your membership size, and your retention level. Different reinsurers have different manual levers and weights. A larger membership is more experience rated. Higher retentions are more manual rated. So, if you have a large membership, but a relatively low retention level, the increase in general medical costs driven by Wegovy and other weight loss drugs may start to impact your reinsurance trend and premium. If you have a higher retention, the manual rates driven by high cost claims will have a larger impact on your reinsurance rates.

Are you interested in a free cost savings review? Have DuNord review your cost savings measures for high claims and help evaluate whether you have opportunities to improve. There is no cost, no commitment!

Call (651) 348-6928 if you would like more information.

  
Source:

https://www.wsj.com/health/healthcare/first-medicare-health-plans-to-start-paying-for-weight-loss-drug-wegovy-044588f5

https://www.cnn.com/2024/04/02/investing/costco-ozempic-weight-loss/index.html

BRAD QUINN
Principal, DuNord Reinsurance Consulting
BradQ@DuNordRe.com
O: (651) 348-6928
C: (612) 382-5094
DuNordRe.com

VAUGHN FRANCIS
Account Executive
DuNord Reinsurance Consulting

VaughnF@DuNordRe.com
C: (651) 503-2577
DuNordRe.com