HI Claims Expected to Rise 10% in the Next 12 Months

In a survey of about 60 health organizations around the country earlier in the year, Aon Consulting, a subsidiary of insurance broker Aon Corp., found that insurers expect to pay out 10.7 percent more in claims for preferred provider organization, or PPO, managed care. Many factors contribute to the rising cost of providing insurance, including expensive medical treatment, health issues related to obesity and an aging population, the number of unemployed taking advantage of short-term benefits and the effect of the new health care law.

To combat this increase, insurers say they will negotiate better rates with providers and move towards having their accounts use select networks which provide high quality care at an efficient price. Some companies are even having their CFOs sit in on the provider negotiations.

Health Insurance Costs: Not Going Down Yet

One of the challenges with health care reform was that it was sold as a way to reduce the cost of health care in this country. Given this, consumers are expecting their health care costs to drop in the next few years. Unfortunately, since the major cost containment provisions of the act will not take place until 2014 and then on a pilot basis, it will be awhile before we see the cost curve "bent".

Some of the provisions that are now available, like tax credits for small (25 or less employees) employers are now available, However, a recent Commonwealth Fund study estimated that although more than 16 million workers are employees of businesses that will be eligible for the tax credit, only 3.4 million work for business that will take advantage of the credit to stabilize or expand coverage. This is a significant number of people, but it represents only about 2 percent of the current U.S. civilian labor force.

There are other provisions of reform that should help to lower the cost of insurance. The reinsurance program to assist employers with retiree health costs may indirectly lower costs to employees, and the high-risk pools may marginally reduce the cost shift from uncompensated care. Over the long-term, the cost-controlling provisions linked to reform of the medical delivery system should provide enormous benefits to employers and employees and taxpayers.

Although the absolute costs to employers and employees will rise, so will the value that they get for this spending due to provisions such as eliminating caps on lifetime benefits. Often overlooked in conversations about the cost of health insurance is the quality of coverage. Though the average cost of health insurance is predicted to rise in response to new regulations and people’s electing to choose more comprehensive coverage, the cost for comparable health insurance will fall. This is a subtle distinction and, as such, has been the subject of much unsubtle political debate.

Commonwealth Fund Study: We Need Better Criteria in Selecting Physicians

A study released by the Commonwealth Fund (http://www.commonwealthfund.org/Content/Publications/In-the-Literature/2010/Sep/Associations-Between-Physician-Characteristics.aspx) found that the normal ways people select their doctors ( e.g., medical school, malpractice history, board certification) have little correlation with the type of care they will receive. Given this the authors say it is important that consumers look at clinical quality measures when selecting a physician instead. Unfortunately, this data is not easily accessible.

Kaiser Survey: Employees Paying More for Coverage

The Kaiser Foundation just released its annual survey of employer health insurance costs and how these costs were shared. The major finding was that while the cost of coverage went up 3 percent, employee contributions towards their coverage increased 14 percent.

http://www.kff.org/insurance/090210nr.cfm

Since 2005, workers’ contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent.

And while most employees have PPO coverage (58%), it is interesting to note that HDHPs coverage increased from 8% to 13% between 2008 and 2010.

In short, employees continue to pay a greater and greater share of their coverage at a rate that far outstrips their wage increases.

How One Company Controls Health Costs

From Forbes magazine here is an article about how providing employees with an HSA accounts turned them into smart consumers and lowered their annual health costs:

http://www.forbes.com/2010/09/09/health-care-cost-containment-leadership-managing-human-capital-10-employees.html

What I found interesting was that they were able to get good data on costs and quality which often is a major isse for an employee looking to make an informed provider decision.

Employers Turning to Wellness Programs

According to an article in the Witchita Eagle (http://www.kansas.com/2010/09/09/1484748/ness-fits-strategy.html) more and more employers are instituting wellness programs for their employees--up to 81% nationally. The article provides a good summary of the issues involved in establishing a program. But it was encouraging to see more and more employers viewing the health of their employers in this way:

"Employers are starting to view health as a competitive economic advantage," he said. "They're finally starting to focus on the demand side of the equation instead of the cost side."

Healthy workers are not only less expensive they are more productive. This obviously is of great concern to small employers where an absence of just one employee is a major issue. However providing health promotion programs to small employers at no cost is an issue for most health plans. Small employers switch carriers on an annual basis and therefore the payoff of a health promotion program several years down the road makes little economic sense for a health plan who very likely no longer has the group as an account.

More Data on Doctor Quality Rankings

Kaiser Health News has a good column today on how people select physicians. It amazes me that the number one way is still "the across the fence" recommendation from friends and neighbors. Why is this when more and more insurers provide physician ratings? According to the column by Michelle Andrews (http://www.kaiserhealthnews.org/Features/Insuring-Your-Health/andrews-column-on-physician-ratings.aspx):

"Often insurers will do a two-step process," says Ha Tu, a senior health researcher at the Center for Studying Health System Change, a nonpartisan research and policy organization based in Washington. First, they "make sure doctors meet a quality threshold, but not a very high one. Then they'll weed them out further based on cost."

Complicating the situation for consumers is the fact that every insurer measures these variables differently, and there are no agreed-upon standards for which combination of attributes makes a top-notch doctor. In fact, a physician who receives a top rating from one insurer may receive a middling or even low score from another, says Elizabeth McGlynn, associate director at Rand Health, a division of Rand, a think tank based in Santa Monica, Calif.

It's no surprise then that doctors are resistant to many insurer efforts to rate physicians. In a recent letter to 47 health plans, the American Medical Association and 46 state medical societies asked the plans to improve the accuracy, reliability and transparency of physician ratings. To support this call for change, the letter pointed to research by Rand that examined physician cost profiles and found that health-plan ratings were inaccurate up to two-thirds of the time.

The quest for a common, accepted definition of quality continues.