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Health Insurance Costs rising sharply.... 1999 marks the return of double digit average price increases for almost all carriers. The efficiencies that were gained in the 90’s with the shift to managed care
options such as PPO’s and HMO’s have gone as far as they can in reducing costs to the consumer. The pendulum has begun to swing back towards much higher premiums. Unfortunately, we believe that this acceleration
in cost increases will continue for the next 24-36 months. There are many factors that lead to the this increase which include:
- Cost Shifting
- Federal programs such as Medicare and Medicaid limit benefits in order to balance budgets. These budgetary limits do not accurately reflect the the costs of treating public patients. As a result, doctors and hospitals make up the difference in revenue by shifting charges to those who are capable of paying with private insurance.
- Mandated Benefits
- Every time the government regulates certain benefits, such as mental health, maternity stays, fertility coverage, preventive care, chiropractic, the costs of those benefits are passed on to everyone regardless of who uses them. These benefits are important, but are creating a perceived big-brother health care system with much higher utilization.
- Technology
- New technology and drug treatments are increasingly expensive. Open heart surgery and organ transplants are almost routine. And where an average x-ray may cost $80, the same MRI costs
$1200. The potential overuse of technology is being encouraged by multi hundred million dollar medical facilities that need to make a return on their investment.
- An aging America
- There are more people over age 50 than school age, and a 55 year old has higher average medical bills than a 16 year old.
- Malpractice and Overtreatment-
According to the American Medical News,
a study by physicians of the AMA more than 8 of 10 physicians admit to practicing defensive medicine to avoid malpractice suits by ordering additional and sometimes unnecessary tests.
The average insurance carrier prices a policy with the expectation of paying out between 75-80% in actual medical claim payments. The other 20-25% is used for administration,
commissions and profit. Health insurance utilization is generally trend driven. Higher use leads directly to higher costs. It is unusual for a large insurance company to singularly experience a
bad quarter or period. A large carrier can disperse its risk over a broad population and if the numbers are not good, price increases will follow. What happens to one insurer generally is happening, or will
happen, to all carriers. In the second half of 1998, we believe that all carriers experienced a sharp and unexpected upturn in claims. Each carrier is reacting differently. Some are
rapidly increasing rates trying to become profitable quickly at the risk of losing their health members. Other carriers are steadily increasing prices month to month in order to reach their profitability targets
in a more orderly fashion. Things you can do to control costs. Be part of a PPO -
About 5%-10% of health plan subscribers that have access to some sort of managed care are not in any type of managed care plan. We are not aware of any reason with any carrier where this is appropriate. It’s not good for the member or the insurance company.
Ask your doctor if he is part of an HMO - If he is, see if you have access to a plan with your doctor in the plan. Make sure that you have the right plan design
- Many people like a low deductible plan such as a $250 deductible. Many times the $500 will be more than $250 less expensive. Families in more urban (expensive) areas should consider MSA plans. Have a good and active agent -
By reading this, you obviously have some on-hands interest in your own healthcare. You are probably more informed and a better consumer than most, but.... A good insurance agent can provide you
with information that you may not have been aware of or considered. The cost to you is nothing. Having a professional to discuss controlling your healthcare costs can save you a lot more than just premium.
Mark H. Gurda- Castle Group Health- 4/99
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