Claims Are Key To Health Care Cost Control
Randell
In 2006, the passage of health insurance reform required all Massachusetts residents to have health insurance that meets “minimum credible coverage,” or pay a penalty. In 2012, that penalty is $1,260, if your income exceeds 300 percent of federal poverty guidelines. To avoid this penalty, proponents of the law said health insurance exchanges and associations would be created, offering extremely low health insurance rates.
This never, ever made sense, then or now. Health insurance premiums are not inanimate objects, where you always get a better price if you buy 1,000 versus just one. The main driver of health insurance premiums is not the number of people in the group, but claims. For example, a group of 1,000 with high claims will have high rates, but a group of 200 with low claims will have better rates.
There's only one way you can control premium costs: by controlling the costs of claims. It's that simple.
But how do you do that?
First, subscribers must realize the costs of the services they're receiving, versus a flat co-payment that's the same regardless of the actual cost to the insurance company. Here are some changes to health insurance plans that forced employees to realize actual costs and nudge them to seek the most competitive prices, which lowers claims costs.
• Blue Cross, for example, has a rider called Hospital Choice Cost Sharing, which lowers an employer's rates approximately 7 percent, but charges an extra $1,000 to the employee if he or she uses a higher-cost hospital.
• Carriers have priced their deductible plans aggressively, which exposes employees to annual maximum out-of-pocket costs (from $500 to $2,000) for hospitalization, day surgery, scans, diagnostic testing and lab work. Subscribers with these plans now look for the lowest costs when they realize they bear all of it until they reach their deductibles.
• Carriers have begun to offer plans that “tier” hospitals based on how much they charge, then assign different co-payments depending on the tiers.
Second, you need subscribers to be healthy. Besides health club reimbursements, we're starting to see people being rewarded for being healthy. For example, Blue Cross has a new rider on its policies that adds 0.3 percent to the premium costs for groups with less than 50 employees that have 10 people enrolled. A participant must fill out a one-line health risk assessment, while the primary care physician must complete a clinician health review. Assuming you're in good health, you'll get a $300 gift card. If not, you'll get $100 and the opportunity to get the other $200 if you meet certain goals that are set for you. At the same time, the employer will get a refund for up to 5 percent of the premium if 80 percent of the employees on the health plan participate in the program.
Universal health insurance does not lower health insurance premiums. The changes being made to plan designs that help control claim costs does, and we're starting to see the results reflected in the lowest health insurance increases since the inception of health reform.
(Bill Randell is president of Advantage Benefits in Worcester. Contact him at Bill@AdvantageBenefits.com.)
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