Archive for August, 2010

Part 2: More 2010 Medical Cost Trends

Tuesday, August 31st, 2010

This topic has been very interesting and popular to our readers; therefore, we thought it would be helpful to continue with more 2010 medical cost trends. In this blog we will look at health care fraud and abuse, lifestyle factors, some preventable risk factors, and lastly where the money is going.

Health Care Fraud and Abuse:

  1. Health care fraud is a growing problem that is estimated to cost $69 billion, according to the National Health Care Anti-Fraud Association. This means that $100 million per day, which makes health care more expensive.
  2. Health care fraud accounted for 5% of the $1.9 trillion spend on health care in 2004.

Lifestyle Factors: Multiple chronic health conditions:

  1. Chronic disease accounts for about 75% of the more than $2 trillion spent on health care yearly in the U.S.
  2. 80% of seniors have least one chronic condition.
  3. 50% of seniors have at least two chronic conditions
  4. In 1996, 7% of Americans had more than three chronic conditions and in 2005 the percentage rose to 13%.

What are some preventable risk factors?:

  1. Obesity – 10% of total claims costs are directly attributable to obesity.
  2. Tobacco use – 25% of Americans smoke and 10% of total claims are attributable to smoking.
  3. Sedentary lifestyle – 60% of Americans don’t exercise and only 3% follow basic wellness goals.
  4. Poor nutrition – 60% of Americans exceed their ideal body mass index (BMI).

Where does the money go?:

  1. In 2007, PricewaterhouseCoopers Health Research Institute completed a national report to determine factors driving health care costs. This report showed that an average 87 cents of every premium dollar spent on medical services and products, with hospitals and physicians receiving more than two-thirds of the premium.
  2. On average, for each premium dollar spent, 10 cents goes toward insurer’ administrative functions, which include: information technology investments, premium taxes, fraud detection, provider credentialing, pay-for-performance programs, enrollment and billing, and claims processing.

We hope you have found this information helpful and interesting. Being knowledgeable in the medical cost trends is very important for both employers and employees. Your benefit consultant can help you better understand these trends.

(Resource: Anthem Blue Cross)

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Are you aware of the 2010 Medical Cost Trends?

Thursday, August 26th, 2010

This blog will address the 2010 medical cost trends. Today, the cost of health care is a very large issue for small businesses. When a small business is trying to attract top talent, offering benefits is key. However, the question is how do you balance the rising health care costs with profitability?

The most frequently asked question is, why are rates rising?

According to a brochure by Anthem Blue Cross in 2008 national spending on health care reached $2.3 trillion. So, the question is what factors contributed to this cost. There are three costs we will look at, treatment costs, prescription drug costs and utilization, and cost shifting.

Some factors that drive higher treatment costs include:

  1. Medical price inflation is driving 51% if the growth in health care spending.
  2. Doctors in the U.S. earn two to three times as much as other industrialized countries.
  3. More physicians are becoming specialists and specialists charge their patients twice as much.
  4. Between 1997 and 2006 compensation increased 97% for dermatologists, 78% for gastroenterologists and 65% for radiologists.
  5. Medical technology is expensive. It has lead to improved care, but its contribution to health care spending growth ranges from 38% to 65%.

Factors that drive higher prescription drug costs and utilization include:

  1. Between 1997 and 2007, prices for prescription drugs grew at an average of 2 1/2 times inflation.
  2. Specialty drugs can save and extend lives, but the cost is very high. A new cancer drug can cost $100,000 or more per a treatment.
  3. Half of adults in the U.S. take at least one drug a day.
  4. 7% of all adults in the U.S. take at least five drugs a day.
  5. 2/3 of all people who walk into a doctor’s office walk out with a prescription.

Now let’s look at cost shifting factors:

  1. Government programs, such as Medicaid, SCHIP, and Medicare – pay physicians and hospitals lower rates than private insurers.
  2. Providers adjust prices charged to insurers to offset losses from partial or non-payers.
  3. A Millman study found cost shifting represents 15% of the amount spent by commercial payers to hospitals and physicians.

The more you are educated on medical cost trends the better decisions you can make for your business. Speaking with an employee benefits consultant will help you better understand health care costs and how to minimize the expense for your business, but still provide the maximum coverage.

(References: Anthem Blue Cross)

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Are you considering switching to a self-funded group health plan?

Wednesday, August 4th, 2010

This is our second blog regarding self-funded insurance plans, last time we wrote about the pros and cons of a self-funded plan, now we are going to discuss why people switch to self-funded group plans. It is important to understand the differences between fully insured and self-funded group health plans if you are thinking about switching. If you find yourself complaining about these various items, then you should probably consider a self-funding group plan.

    1. You are struggling because you feel as though your fully insured plans are inflexible in terms of mandated benefits.
    2. Cost-containment programs that are effective are not available.
    3. Your company is unable to create a uniformed strategy for a national program with solutions that are customized to your company.
    4. Population-specific claim detail is not available to effectively manage risks.
    5. You feel like your fully insured plans are consuming dollars that could be spent elsewhere.

      If you have answered “yes” to any of these items above, then perhaps you should consider switching to a self-funded group plan. Contact your employee benefit consultant for more information on how you can switch your plan.

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