Rising Health Care Costs
Rate increases are, unfortunately, a common and recurring part of the health insurance industry. The entire managed care industry is experiencing larger than usual rate increases.
In a recent Business Week article, health care analyst Kenneth Abramowitz comments, "Rising health insurance inflation is not a sign of failure (of managed care) but simply the price of better accommodation of individual consumer desires."
In other words, consumers are more educated, using more medical services, while expecting the best that technology has to offer. This rise in utilization means higher costs.
To better understand your rate increases consider the following:
- Calculating Renewals – Most carriers have a standardized approach to renewals. For example, they may use a combination of the following:
- change in manual rates
- case characteristic changes (i.e., age, gender & ratio changes)
- change in the group’s overall health
Many carriers also may automatically raise age-banded rates when an insured reaches the new age category throughout the year while others may change age band rates only at the group’s anniversary.
- Cost of Change – Factors to contemplate when considering changing health insurance carriers include:
- Uncertainty for employees created by the change
- Impact of New Network Providers -is the network adequate
- Concerns about ongoing medical treatment
- Additional out-of-pocket expenses resulting from higher co-pays
- Disruptions caused by enrollment meetings that take employees away from their day-to-day activities
- Delays in claims adjudication and receipt of enrollment cards due to transition time between carriers
- Changes – Many employers prefer benefit changes instead of carrier changes because they don’t usually entail the disruptions outlined above.
- Adding Benefits – This may seem strange when facing a large premium increase, but the addition of voluntary dental or life insurance doesn’t cost the employer any more but employees appreciate their flexibility of choice.
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