Critical transfer: brokers should advise self-insured clients to carve out organ-transplant coverage to keep medical-benefits costs healthy.

Critical-care procedures, such as organ transplants, can have a devastating financial impact on a company's health-benefits plan costs. With already astronomical medical costs going nowhere but up, many companies are choosing to self-insure medical benefits, which makes their exposure even more acute. Medical stop-loss insurance can offer a degree of protection, but the costs of certain critical-care procedures are likely to exceed these policy limits, as well. These realities--coupled with the new concern among large public companies to leave no stone unturned in protecting their balance sheets--have catapulted the issue of managing catastrophic medical costs to the top of the corporate agenda, and landed it front and center on the radar screen of insurance brokers, as well.

Fortunately, a few innovative insurers have taken note of this market need and are arming brokers with a solution: "carving out" coverage for one of the highest-severity medical claims a corporate client can face, a solid organ or bone marrow transplant. Policy carve outs are taking the costs and risk of a particular high-cost procedure and transferring them to a third-party.

While the concept of carving out coverage for catastrophic medical claims could apply to several critical-care procedures, transplants are a perfect application for several reasons. First, these procedures can impact the vast majority of large corporations. If an agent has a client with more than 5,000 employees, statistics show that the company can face at least one transplant this year. The number of solid organ transplant procedures conducted in the United States in recent years surpassed 20,000 annually. The number of transplants in the United States has doubled since 1989 from 12,954 to 24,016 performed in 2002, according to the Organ Procurement and Transplantation Network.

The cost and complexity of transplant procedures make them particularly grave financial risks. The average transplant cost, including physician and hospital fees, ranges from $75,000 to $350,000, according to the National Foundation for Transplants. This doesn't include the costs of the one-year immunosuppressant drug protocol necessary post transplant to prevent organ rejection or costs from complications, pre-transplant or follow-up treatments. Organ rejections necessitate a repeat procedure, leaving a company's bottom line even more vulnerable. The costs cited are an average, as they are dependent on the type of transplant and on what type of facility executes the procedure. Candidates for kidney transplants top the waiting list published by the United Network for Organ Sharing, followed by liver candidates and lung candidates. The National Foundation for Transplants reports the average cost for a kidney transplant ranges from $75,000 to $100,000, liver transplants from $250,000 to $275,000 and lung transplants from $200,000 to $250,000.

The Potential Exposure

Given those potential costs, one transplant event can have a significant negative financial impact on a company. In one example, a company's chief marketing executive required a liver transplant in November. The employer self-insures medical benefits and maintains medical stop-loss coverage to protect against catastrophic loss at the reinsurance layer. The employee's transplant procedure would most likely exhaust the client's specific stop-loss deductible for the year. With the high costs of immunosuppressant drugs and the risk of a second transplant if the original is rejected, the specific deductible could be impacted in the next policy year, as well. While this example refers to one incident at an organization, large organizations can see two or more transplants a year, seriously impacting the bottom line.

As medical stop-loss premiums continue to rise due to medical trends, the companies that suffer catastrophic losses will be subject to significant premium increases. Moreover, a client's human resources department would be left struggling to manage medical costs, while supporting the employee through an exceptionally difficult experience with which it most likely has little, if any, familiarity.

An Ounce of Prevention

If a managed transplant program is in place, the coverage will pay the entire cost of the executive's liver transplant. First-dollar coverage would be provided for costs related to the transplant, as well as the substantial expense of vital immunosuppressant drugs--all from 10 days prior to the transplant procedure, until 365 days post transplant. Both the company's primary health plan and medical stop-loss limits would be spared from this one incident.

At the same time, the program would provide the patient with access to the nation's leading transplant centers, including Johns Hopkins University Hospital and hospitals associated with the Mayo Clinic. Statistics show that the best centers have both lower re-transplantation rates and better ultimate case outcomes.

Certain managed transplant programs also assign nurse case managers to each transplant patient. These experts, typically registered nurses with critical-care experience, serve a dual role as the patient's advocate and an expert resource to help the employer control transplant costs. Case managers help the employee and his or her family to steer through the complex transplant process and weigh treatment options. They are involved in supporting the patient's adherence to the regimen of immunosuppressant drugs that is essential following the transplant.

At the same time, these case managers support the employer's effort to mitigate the ultimate medical costs--a job that experience has shown is done best by investing in world-class medical care beginning immediately upon diagnosis. Arranging the best possible care from the onset promotes a better outcome for both the employee and for the employer, who must safeguard its balance sheet against lost profits and its workplace against productivity losses.

A managed transplant program also can mitigate several other liabilities employers can face as a result of an employee transplant. The program helps to manage a client's fiduciary risk. By allowing the client to provide all employees with the same level of benefits and a consistent standard of medical care, the program helps manage potential discrimination issues. This is particularly important when a client has multiple locations and provides different health plans throughout its work force. Since managed transplant programs typically pay for academic center reviews and second opinions, they also put the toughest transplant case decisions in the hands of experts, helping to limit the potential liability of employers and managed care organizations alike.

Because all managed transplant programs are not created equally, the following factors should be considered: the financial strength and market commitment of the program underwriter, the quality of the program's medical-care providers and the experience of the case managers who will be working one-on-one with patients and their families.

As brokers make more companies aware of how managed transplant programs can help them manage catastrophic medical costs, demand for such programs has been rising. Requests for similar carve-out solutions targeting other areas of catastrophic medical exposure are sure to follow. In the meantime, whether a client self-insures medical benefits or relies on medical stop-loss to halt the onslaught of severe medical expenses, a managed transplant program can offer a proven way to mitigate the financial impact of these increasingly common catastrophic cases.

Transplant Waiting List
Candidates as of Aug. 14, 2003

The United Network for Organ
Sharing maintains a real-time listing
at its Web site,
www.unos.org., of candidates
awaiting organ transplants.

Waiting list candidates

All *                     82,501
Kidney                    55,354
Pancreas                   1,405
Kidney/Pancreas            2,410
Liver                     17,381
Intestine                    173
Heart                      3,684
Lung                       3,900
Heart/Lung                   182

* All candidates will be less than the sum due to
candidates waiting for multiple organs

Transplants Performed
January-May 2003

Total                     10,481
Deceased Donor             7,764
Living Donor               2,717

Based on Organ Procurement and Transplantation
Network data as of 08/01/2003

Organs Recovered from Donors
January-May 2003

Total                      5,385
Deceased Donor             2,665
Living Donor               2,720

Based on Organ Procurement and Transplantation
Network data as of 08/01/2003

Source: United Network for Organ Sharing;
Organ Procurement and Transplantation Network

Organ Transplant Costs

Costs for organ transplants can vary due to type of organ and facility performing the operation. Numbers cited are broad averages and only reflect hospital and physician fees.

* Heart--$300,000

* Heart/Lung--$300,000 to $350,000

* Isolated Small Bowel Transplant--$350,000

* Kidney--$75,000 to $100,000

* Kidney/Pancreas--$150,000

* Liver--$250,000 to $275,000

* Lung--$200,000 to $250,000

* Pancreas--$100,000

Source: National Foundation for Transplants

Stephen Mueller is senior vice president of the Accident and Health Group of Zurich North America.