North Dakota’s healthcare spending is rising faster than in most states, and prescription medicine is a primary driver, according to insurance data.

Statistics from the North Dakota Insurance Department show claims per insured person have been gradually rising in the state. Claims paid or incurred by insurers were up in the latest data year (2017 to 2018) by 7.6% in the individual market, 11.9% in small group and 3% in large group.

Inflation and technology advances are factors behind rising health care costs, said Tony Piscione, director of Acturial at Blue Cross Blue Shield of North Dakota. Pharmacy has been an even larger factor, he said.

“We’ve seen a pretty big increase in pharmacy costs, probably at about double the rate of our medical costs, and that’s also contributing to the overall cost increases we’ve seen,” he said.

Mike Potts, vice president of Health Networks at BCBSND, said the cost of highly specialized drugs influences those pharmacy increases.

“There’s just been really a big growth in research and how quickly some of these drugs go through the FDA approval process, and there’s been some real active work on the part of the FDA to try to speed that process up and really to get these drugs tested and get them in the market as quickly as possible,” Potts said. “A lot of them are for a smaller subset of consumers and patients for increasingly more rare conditions. So the cost to develop and, of course, ultimately the number of folks that potentially would be prescribed these drugs is pretty small.”

BCBSND has more than 200 of these specialty drugs it covers, he said.

To control costs, BCBSND works with partner Prime Therapeutics to evaluate trends and standards of practice and monitor prescriptions to ensure patients prescribed specialty drugs meet the clinical criteria set through the FDA’s approval process, Potts said.

“But in a lot of cases they are appropriate, and so those costs, once they get started, they can continue, oftentimes for many years or lifetime,” he said.

However, drugs with high costs on the front end can save money on the back end. Potts cited the example of the drug to cure Hepatitis C, which avoids future repeat hospitalizations and long treatment.

“They aren’t all cures, but many of them have certainly helped people live longer lives and in a lot of cases they’re like miracle drugs,” Potts said.

Surveyed by the Insurance Department, insurers in North Dakota reported the top driver of health care cost increases in 2018 was prescription drugs, which accounted for 22.8% of the $112.7 million increase. Certain physician services and inpatient and outpatient hospital care were not far behind.

“Even though we’ve seen an overall decline in the overall numbers of inpatient admissions, the intensity of each of those admissions is going up, and so, generally, the overall cost per admission is going up. It’s still something we’re very actively managing,” Potts said.

“We have nursing staff that will reach out, offer assistance to the healthcare provider if there’s any coordination needed, but also work directly with the patient, particularly after the admission is over,” he said. “In a lot of cases, it’s about helping them get the most appropriate care and to answer their questions, just to make sure that they have a good experience.”

As medicine has become more specialized, insurers also are seeing higher costs in physician care, Potts said.

“We still place a very strong emphasis in our organization on primary care,” he said. Particularly members with multiple chronic conditions benefit from a designated primary care provider who can coordinate with different specialists, he said. That’s been the focus of BCBSND’s Blue Alliance program, instituted last year, with 90% of primary care providers participating. It gives primary care providers data to identify members who more frequently use services so they can gain insights into preventing health problems that can lead to hospital stays or emergency room visits.

Digital health care, which allows for connections to be made as close to the patient as in the home, also comes with cost savings, Potts said.

“We’re expanding services in those areas as they make sense,” he said. “We’re collaborating with our providers more and more so that if local providers in North Dakota want to make use of that, we’re definitely going to encourage it and we’ll have a mechanism to pay for it. It’ll just be part of the normal course of business five years from now.

“We’re starting carefully and sort of slowly with this, but at the same time we’re ready to move as quickly as our customers and providers and our benefits ultimately allow us to move,” he added.

Medica, which holds a small share of the N.D. health insurance market, also has programs to manage health costs, including a new coronavirus high-risk outreach program. Under the program, Medica developed a model to identify members at highest risk for experiencing complications from COVID-19 so they can be provided information and resources to stay as healthy as possible. Medica also can assist medical providers in reaching out to those high-risk patients in an effort to keep them healthy and save costs.

According to information from the Centers for Medicare and Medicaid Services, the cost of personal health care in North Dakota rose from about $6 billion in 2010 to more than $7.8 billion in 2014 – a 30% increase. Per capita spending came to $9,851. Among personal expenses are hospital care, physician, dental, home health, prescription drugs, medical products and nursing homes.

North Dakota ranked seventh in the nation in per capita health expenditures in 2014, but had the nation’s fastest growing health costs over the 10 years ending in 2014, according to QuoteWizard, an insurance comparison marketplace.

Piscione pointed out that although North Dakota’s healthcare premiums have risen at a faster rate in recent years than in many states, the state had been ranked low in 2013 nationally in average premiums. Data tend to show lower premium states rising more rapidly after passage of the Affordable Care Act in 2010, he said.

“Looking at 2018, there’s more consistency in what the plans offer because they have to cover the 10 essential health benefits under the ACA,” he said. “But in 2013, there was probably more variation and that can influence that comparison over time.”

Health cost increases also can be difficult to compare among the states because of the multiple factors involved. Within BCBSND, claim costs have been going up about 4.5% a year, Piscione said.

BSBSND serves the bulk of North Dakota’s insurance market. Sanford Health holds a small but somewhat larger share than Medica and has provided coverage to public employees in the Public Employees Retirement System since 2015.

According to the Insurance Department review, in the five years from 2014 to 2018, the average premium increase among all insurers in the individual market in North Dakota ranged from 5.2% to 14% a year. In the small group market, the range was 3.4% to 8%, and in the large group market, it was 5.9% to 10.6%. Commission and administrative costs varied by insurer from 8% to 17% of total premiums.

A reinsurance program adopted by the state is expected to decrease premiums as much as 20% in the individual market this year. The program provides for a portion of claims to be paid through a reinsurance pool.

ND Claims Incurred

Per Member Per Month 2014 2015 2016 2017 2018 Increase

Average Individual Market $295 $312 $361 $389 $419 42%

Average Small Group Market $308 $334 $355 $359 $401 30%

Average Large Group Market $330 $357 $379 $403 $415 26%

NDPERS $446 $441 $441 $454 2%

Source: N.D. Insurance Department