What’s really driving large medical claims?

As healthcare costs have risen dramatically in recent years, it may no longer be surprising that a handful of high-cost claims can impact a company's bottom line. But by diving deeper into the dynamics of these claims, employers can uncover valuable insights that pave the way for smart, effective cost-control strategies. Savvy data analysis and proactive planning not only help manage expenses but also can foster a healthier workforce, ultimately benefiting everyone involved.

In a recent study, Alliant’s analytics team reviewed medical and pharmacy claims of 1.9 million participants in employer-sponsored health plans across the United States. The study looked at members with total claims of $100,000 or more over a 12-month period, because serious conditions often lead to treatments that are linked to multiple diagnosis codes.

One of the biggest drivers of employer health costs is the rising expense of very large claims from members dealing with complex conditions like cancer and premature births.

In the 12 months ending June 2025, 34% of employer expenses were attributable to the 1.2% of members who filed annual claims of more than $100,000. That represents a 40% increase in the number of high-cost claimants over two years and a 10% rise in the share of employer health spending for these claims.

The increase is even sharper for members with annual claim expenses of $1 million or more. Such claims were 3.2% of employer spending in the most recent year, up from 2.3% two years earlier.

Four trends driving increases in high-cost claims

1. More people are getting diagnosed with serious conditions. Cancer
   rates, in particular for younger adults, are surging, and the working
   population is getting older, contributing to more disease burden.
   
   
2. There are more very expensive treatments. Spending is rising rapidly on specialty drugs, especially for cancer, obesity, and rare diseases. In 2023, the US spent $99 billion on anticancer treatments, and this is expected to rise to $180 billion by 2028. Prescription drug prices in the US are generally two to three times higher than in other wealthy countries. This is largely because pharmaceutical companies can charge as much as the market will bear.
   
   
3. Health systems are raising prices. Hospital consolidation has substantially reduced competition, allowing systems to negotiate higher rates. Techniques like upcoding and the use of AI in billing practices are driving up medical bills.
   
   
4. Medical inflation has surpassed general inflation, primarily due to rising costs of health care supplies and labor.

Key findings on large claims

Alliant’s study of large claims data identified these key findings:

• Company spending on large claims has increased by two percentage points in two years.
• The number of members with high claims is rising quickly.
• Bills are going up especially fast for the largest claims.
• Pharmacy costs are driving the increases.
• Hospitalization is the largest expense for high-cost claims.
• Cancer is driving high-cost claim expense.
• Childbirth and cancer have the highest average cost.
• High-cost claims are more common in some industries

Suggested solutions for managing large claim costs

Large claims typically aren’t at the individual's discretion and may be unavoidable. However, certain strategies or practices can effectively manage the cost of large claims:

• Manage the site of care for services related to high-cost claims. For example, chemotherapy or infusion therapy for cancer claims can be received at settings varying from in-hospital to at-home. The costs can be significantly lower depending on the setting, resulting in a reduction of 1/3 or ½ where clinically appropriate.
  
  
• Thorough bill review and management. With the enhanced focus by hospital systems on maximizing revenue, it is critical that the bills on the large claims are thoroughly reviewed to identify any issues or errors that would result in a reduction in billed amount. Alliant’s consultants, tools, and partners are focused on identifying these opportunities.
  
  
• Use reference-based pricing. Negotiate contracts with providers based on a fixed markup over Medicare rates. This is proven to slow runaway fees.
  
  
• Steer members to cost-effective, high-quality care.
  
  
  • Identify the highest-quality medical providers and facilities and encourage their use. This can result in a 13-27% savings when you compare higher quality vs. lower quality providers.
    
    
  • Use centers of excellence. Arrange for top medical centers to handle certain complex conditions. Getting treatments right the first time saves money in the long run.
    
    
  • Provide condition-specific assistance. Programs that provide care navigation and specialized guidance for members with complex or chronic conditions can reduce costs and improve outcomes.

In addition to managing your direct costs, these programs can help reduce your premiums for stop loss coverage. Carriers will give better rates to employers who can show a disciplined process for managing large-claim expenses.

How Alliant can help

Alliant uses state-of-the-art analytics to carefully review your company’s past claims and identify the conditions and providers that are most responsible for large-claim costs. Our consultants help to design programs that increase care quality while reducing costs. And as market experts, we can connect you with reliable vendors that will implement your strategy.

To access Alliant's detailed data analysis on large medical claims and how they impact employers, download the full article.