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Benefits Business New trends in cost and quality As cost increases slow down, quality concerns move to the forefront By Len Strazewski Money, money, money.That’s what your clients want to talk about as they approach their health benefits renewals. After decades of more or less steady increases in health care premiums, health care costs are always employers’ first concern, followed distantly by health care quality concerns. However, if present health care industry trends continue, those priorities may soon be reversed—and agents may need to be ready with some new responses. According to recent reports from health benefits experts, health care costs are beginning to moderate—pressured by new benefit plan designs and the growing attention of state and national politics. As costs stabilize, benefits buyers and consumers are starting to pay more attention to the value and quality of the services they are buying. In late June, PricewaterhouseCoopers LLC (PwC) released cost projections for 2008, likely the first of many benefits consulting studies to target expense trends. The study predicts a return to single-digit increases in health benefit expenses next year, based on actual medical cost trend analysis. Medical cost trend data are the raw calculations that health insurers and large employers use to compare health plan costs over time and set premiums and self-insurance budgets. The projections indicate that health insurers are anticipating only a 9.9% increase in medical costs for Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs), and 7.4% for consumer-directed health plans, compared to increases of 11.9%, 11.8% and 10.7% for those plans respectively in the prior year. “Unfortunately, health care costs continue their upward trajectory, and the annual increase is reason for concern for all Americans,” says Jack Rodgers, managing director of the PwC health policy group. “But we are seeing that trends behind the numbers are positive. “The growth rate has started to decline and is running nearly parallel to the overall rate of inflation. While national health spending has outpaced GDP (Gross Domestic Product) for nearly two decades, the gap between these two measures has been narrowing since 2004.” Why the slowdown? What’s driving the slower rate of increase? The study points to four trends: • Slower growth of spending for prescription drugs, which accounted for 14% of premium costs in 2007 • Increased cost sharing with employees and greater transparency of costs for employees—allowing them to be better health care consumers • Wellness programs and a total health management approach to benefits • Greater use of information tech-nology and electronic medical records Quality issues, however, remain unresolved across the United States, triggering new concerns about the way the private health care system and health plans function. In its first State Health System Scorecard, the Commonwealth Fund, a nonpartisan organization that studies health care policy and quality issues, points to a wide variance in 32 measures of quality across the 50 states. For example, the percentage of adults who remained without health insurance in 2005 ranged from a low of 11% in Minnesota to a high of 30% in Texas. The percentage of adults age 50 or older receiving all recommended preventive care services ranged from a high of 50% in Minnesota to a low of 33% in Idaho. The study noted that that death rates before age 75 from conditions that could have been prevented with timely, appropriate health care were 50% lower in the five best states (Minnesota, Utah, Wyoming, Vermont and Alaska) than in the five worst states (Tennessee, Arkansas, Louisiana, Mississippi and the District of Columbia). The average death rates were 74.1 per 100,000 in the best five states and 147.7 per 100,000 in the worst five states. Health insurance was a positive contributor to health care quality, but high levels of health care spending did not necessarily buy better health care, according to researchers. Across the country, the scorecard found that the states that did well with access to care—particularly those with the highest levels of health insurance coverage—were also most likely to have the best health care according to the study’s measures. Four of the five states with best access (Massachusetts, Iowa, Rhode Island and Maine) ranked among the highest in quality of care. However, researchers found no systematic link between the highest levels of health care spending and the highest levels of care. The states with the highest rates of health care spending also had among the highest rates of preventable hospital admissions, including readmissions for diabetes, asthma and other chronic illnesses that should not require hospitalization. Response to quality concerns Both large employers and the health insurance industry are beginning to react to the health care quality issues raised by this and other studies that indicate that U.S. health care quality is not at acceptable levels. In April, America’s Health Insurance Plans (AHIP), the trade organization that represents the health insurance industry, proposed a three-point initiative designed to improve the quality of health care and health information. “Improving the safety and quality of care will allow the nation to more quickly provide coverage to all Americans,” says Karen Ignagni, president and chief executive officer of AHIP. “We can enhance the value of the nation’s investment in health care and ensure that patients receive the right care at the right time in the right setting.” The initiative, however, proposed no changes in health plans themselves, but rather proposed the formation of a new public-private partnership to provide up-to-date and objective health care performance information and promote best practices and transparency in health care delivery. The organization also proposed bolstering the authority of the federal Food and Drug Administration to monitor the long-term impact of new drugs and medical devices, a new nationwide dispute resolution system to reduce costly litigation, and the adoption of a national medical research agenda to close the knowledge gap between physicians and health care consumers. In June, the ERISA Industry Committee (ERIC), an organization representing large employers, took the need for improved health care quality to a more dramatic level. The organization proposed an alternative benefits platform for both retirement and health care. The organization proposed the establishment of a new class of independent benefits administrators that would compete with each other and the insurance industry on the basis of quality, information technology, plan design and cost. Each benefits administrator would be required to offer a core set of lifetime security benefits, including health care, retirement and short-term savings. The administrators could market their benefits to employers or individuals, and employers could choose an administrator to provide benefits to their employees and contribute to the cost—or not. Employers who already provide these benefits with traditional health and retirement plans could continue to use their present system of benefits. “The new benefit platform offers three strong positives for both health and retirement benefits: portability, engagement of both consumers and employers, and a level playing field for everyone to participate,” says ERIC President Mark Ugoretz. Ugoretz adds that the platform would include provisions for transparency and accountability, including publicly available comparison tools for individuals to assess the quality and cost of providers and health plans plus incentives for providers that reward high-quality care. Neither of these industry proposals is likely to be adopted by the benefits market anytime soon, but both point toward the increasing concern over the quality of health benefits—and the need for agents and brokers to be ready with new ideas when their clients raise the issues. * The author |
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