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Blog posts

Preventive health

Budgeting

The 5/50 Rule for reducing high-cost claims

Sagi Polani

February 12, 2024

3 min

A small percentage of your workforce is responsible for a very large percent of your healthcare expenses. 5/50, to be exact: 5% of your workforce generates 50% of healthcare expenses.

This 5/50 rule has been on the radar for years, and is well documented. A more recent brief from the Employee Benefit Research Institute (EBRI), however, breaks down the 5/50 rule in a way that is both enlightening and instructive - and may hold the potential to reduce high-cost claims.

Old and New High-Cost Claimants

The EBRI’s research shows that of these 5% high-cost claimants:

📊 2.3% are high-cost claimants from the previous year.

📊 2.7% are NEW high-cost claimants who had been in the bottom 90% of claimants the previous year

Together, these claimants account for 50% of all your employee-sponsored healthcare program expenses. Assuming the costs are proportional to the number of claimants, that would mean that about 23% of your healthcare program expenses could have been predicted, because they are effectively continuations from high-cost conditions and situations the year before. But about 27% of your healthcare program expenses are from individuals who are new to the high-cost category. They weren’t generating this level of expenses last year. What happened?

Sometimes the high-cost claim situation is sudden and unpredictable, such as a serious car accident that leaves your employee hospitalized for an extended period of time, and requires extensive and intensive therapy for months after. 

But other times the high-cost claim situation is the result of a condition that had been developing for a long time, such as type 2 diabetes or colorectal cancer. If those conditions had been identified, diagnosed and treated earlier, your employee might never have moved up to the high-cost claimant category.

This reality presents a unique opening for cost reduction through proactive employer intervention in areas such as preventive care, early screenings and health guidance. With the right strategic efforts, there is the potential to save millions of dollars while improving your employee health and wellbeing.

How Fijoya Helps

We designed Fijoya to enable employees to get the individualized care they need for their health and wellbeing, while reducing both the financial and the administrative burden for employers. Reducing high-cost claims caused by preventable health situations accomplishes both of those goals, and therefore it is a priority for Fijoya. Here are some the ways in which we facilitate high-cost claim reduction:

Prevention with Fijoya Care

Fijoya’s platform is a robust, data-driven preventive care solution. The Fijoya Care component of the platform provides employees with the individualized information they need to take charge of their health and catch potential issues early, based on recommendations from the United States Preventative Services Taskforce and the Office of Disease Prevention and Health Promotion.

Fijoya Care directs employees to services on the Fijoya platform that they can utilize to act on these recommendations, making it easy to take care of their health and reduce the chances of high-cost claim conditions developing in the future. 

Streamlined Access to Screenings

Recommended preventative health screenings for US adults include blood pressure, cholesterol, blood sugar levels, colonoscopy, mammogram, pap smear and PSA testing. But a careful analysis of almost 90K US adults found that of all people eligible for a particular screening, a significant percentage does not get screened. Depending on the screening, rates range from 90% down to only 43%.

Fijoya’s platform makes preventative screenings easy to access and easy to pay for. Employees can pay for their screening (just like anything else on Fijoya) with their employer-funded pre-paid card. No need to think about billing, receipts or reimbursements eliminates that hurdle to getting screened - and makes life easier for your Benefits team as well.

Knowledge is Power (to Reduce Costs)

This deeper understanding of the 5/50 healthcare spending rule and how it breaks down can help you reduce high-cost healthcare claims and their accompanying financial and administrative burden. Be proactive in your approach to areas such as preventive care, early screenings and health guidance, and you will both save costs and ultimately enhance the wellbeing of your workforce.

Blog posts

Preventive health

Budgeting

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