Insurance execs address health costs
Nationwide, people are concerned about the ri sing costs of health care. Not only are we seeing increases in the price of medical services but 1999 also brought about an alarming increase in the cost of health insurance premiums. Just what is behind this increase and what are health insurance companies dong about it?
According to Ben Zelman, Vice President of Corporate Development at Medical Mutual of Ohio, the main reason for their premium increases is the rising cost of prescription drugs. There is greater utilization of prescription drugs, which may be linked to drug companies saturating the advertising market. Print advertising and television commercials are leading patients to request specific drugs which may cost more than the drug the physician would otherwise prescribe. And insurance companies have to absorb these extra costs.
Zelman indicates that Medical Mutual of Ohio experienced premium increases ranging from 7 percent to 20 percent in 1999. Most employers experienced about a 10 percent to 15 percent increase. “Although many employers and employees have been bashing managed care, and there have been some shifts from HMO to PPO products, all programs have been affected by the premium increases.” Each employer controls its own increases, but they have all been affected by rising drug costs, and they can only absorb so much of that cost.
Some employers have asked for termination of their prescription drug program through Medical Mutual, which has led to the creation of SaveWell.com. This program, which is available nationwide, offers a discount prescription card for use at participating pharmacies, About 85 percent of all generic and namebrand medications are eligible for discounts, including some that are often left uncovered by other plans, such as birth control. For more information, log onto SaveWell.com.
Zelman says that Medical Mutual has retained 96 percent of its contracts despite the premium increase. Many employers made comparisons with other companies, which led them not to change their coverage since Medical Mutual is not the only insurance company affected.
the premium increase. Many employers made comparisons with other companies, which led them not to change their coverage since Medical Mutual is not the only insurance company affected.
Joe LaGuardia, Regional Vice President of Group Sales for Anthem Blue Cross and Blue Shield, says that prescription drug costs are only partly responsible for his company’s increased insurance premiums. He also cites the costs related to legislation (such as the Patient Advocate Bill), new technology for medical treatment, general inflation, and the push for better quality medical care.
Anthem, the largest health insurance company in the state of Ohio and one of the top eight in size in the country, has seen about a 6 percent to 9 percent increase in insurance premiums over the last year. Other than the natural flow of business, where some contracts are lost and new ones are gained, Anthem’s Toledo market has actually seen an increase in business. Joe LaGuardia feels that is due to “our excellent relationships with providers and the fact that people feel comfortable with our company. We view physicians and hospitals as partners with Anthem working together for higher quality medical coverage.”
This year, Anthem plans to devote more effort to educating patients toward better health, which they hope helps to defray rising medical care costs.
Mark Moser, Vice President of Marketing for Paramount
Healthcare, states that his company has seen a 6
percent to 7 percent increase in its premiums in 1998,
and 10 percent to 12 percent in 1999. For renewing
clients, Paramount tracks the performance of the
account in prior years to come up with an experience
rating, and then they base the next year’s premium rate
on this historical performance. Because of an enormous
rise in medical utilization in the last few years, the
estimates that were made have not been high enough.
In addition, the average age of Paramount’s quarter million members has risen over the last few years, and older people need more medical care. This, along with the exponential increase in prescription drug costs, has also been a factor in insurance premium increases.
According to Moser, Paramount retained 96 percent to 97 percent of their clients in 1999 despite the rising costs of premiums. He believes that their “clients value Paramount’s quality, and they realize that our competitors are in the same boat.” Paramount has a registered pharmacist on staff, as well as a Pharmacy and Therapeutics Committee, which works with their physician panel regarding prescribing habits and general medical care. The company is also very cautious about its overhead, keeping administrative costs as low as 8 percent.
Moser believes that eventually insurance premium costs will drop off, hopefully within the next yeer or two. HMO’s have not been the primary insurer long enough to see these types of trends and be prepared for them. The necessary adjustments are being made.”
Family Health Plan is also seeing a rise in their insurance premiums. Tom Beaty, President and CEO, indicates that “increases are within industry ranges, and there are four main factors driving the increase in health care premiums. Introduction of new technology is outpacing the financing to support it. Pharmaceuticals are increasing at a rate of 14 percent to 18 percent per year with direct advertising to consumers. The public wants proactivity with people living longer. Also, the population is better informed. They are challenging their physicians about their care. Lastly, increased government oversight and regulations have added to the administrative costs along with default regulations like NCQA.”
Family Health Plan has not lost any substantial business due to the premium increases, according to Tom Beaty. He also says, “All groups and programs are affected the same as it relates to medical cost increases, then utilization and program design are other factors that affect cost.” In order to help combat these rising costs, Family Health Plan is attempting to reduce administrative expenses, review program design, and offer tighter networks. And do they feel that this trend of increasing premiums will continue? “According to industry experts and Wall Street, increases will continue, particularly with a tight labor market.”
Recent trends suggest that medical insurance premiums will continue to rise for all insurance companies. Some solutions might be to publicize the profit margins of drug companies, leading to a public outcry, or perhaps to ask for government intervention. In any case, education is key. The more consumers know about improving their own health and about how their insurance works, the better it will be for them and for the insurance carriers.
Copyright Telex Communications, Inc. Mar 01, 2000
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