What Drives the High Cost of Health Care?

Jennifer Agnello, President

The statistics are shocking. In 2017, U.S. health care spending hit $3.5 trillion, or $10,739 per person. Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year over the 2018 to 2027 period; as a result, the health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.

The 2019 Kaiser Family Foundation (KFF) Employer Health Benefits Survey found that the annual family premium for employer health insurance rose 5 percent to average $20,576. On average, employees pay $6,015 toward the cost. A whopping 66 percent of those in employer health plans with high deductibles say they couldn’t pay a medical bill the size of their deductible without going into debt.

Now, let’s talk about the real problems. From all perspectives, there is no one single cause for the rise in costs, nor is there a single solution to contain them. Following are a few of the main drivers:

Pharmaceutical Costs

It’s estimated that prescription drug spending in the United States was approximately $344.5 billion in 2018. The cost has since continued to rise due to a number of factors, including population growth, an increase in number of prescriptions per person, inflation, and changes in the composition of drugs prescribed toward higher price products or price increases.

1 in 4 Americans say they take four or more prescription drugs. According to GoodRx, the average price of brand-name drugs has increased by approximately 30 percent in a nine-month time frame. The average cash price for a 30-day supply of the top 100 brand-name drugs has increased from $300 in October 2018 to more than $400 in July 2019. Specialty drugs have accounted for 41 percent of drug spending in 2018 and are projected to reach 50 percent by 2020.

In most countries, the government negotiates drug prices with drug makers, but when Congress created Medicare Part D, it specifically denied Medicare the right to use its power to negotiate drug prices. Veterans Affairs and Medicaid, which can negotiate drug prices, pay the lowest drug prices. The Congressional Budget Office found that just by giving low-income beneficiaries of Medicare Part D the same discount Medicaid recipients get, the federal government would save $116 billion over 10 years.

Aging Population

According to the World Health Organization, the projected growth of people age 65 or older, worldwide is predicted to rise from 524 million in 2010 to 1.5 billion in 2050. The Centers for Disease Control and Prevention found that Americans are living longer, but increased longevity comes with increased expense. The combined costs of the federal government’s two largest health care programs, Medicare and Medicaid, are projected to nearly double to a combined total of $1.76 trillion in 2025 from $901 billion in 2014.

By 2030 it is expected that more than 60 percent of baby boomers will manage more than one chronic condition, such as hypertension, high cholesterol, arthritis, diabetes, heart disease, cancer, dementia, and congestive heart failure. In 2014, personal health care spending per person for the 65 and older population was $19,098 in 2014, more than five times higher than spending per child ($3,749), and almost three times the spending per working-age person ($7,153).

Lifestyle and Behavioral Choices

More than 70 percent of health care costs are attributable to choices such as obesity, smoking, and alcohol abuse. According to the National Center for Health Statistics, nearly 39.8 percent of Americans are obese and one out of every six children from age 2 to 19 is overweight or obese. This number has doubled for children and quadrupled for adolescents over the past 30 years.

Lack of Adherence to Medical Advice

50 percent of patients DO NOT take medications as prescribed. The results are recurrence of symptoms, duplication of treatment, and increased hospital re-admission rates.

Inefficiencies within the System

Hospitals are estimated to waste as much as $11 billion per year on inefficiencies and unnecessary medical treatments. Preventable mistakes also account for rising costs. As many as 400,000 people die each year as the result of medical error.

Defensive Medicine

The high cost of medical malpractice insurance drives the rise in the practice of defensive medicine. A Gallup survey estimated that $650 billion annually could be attributed to defensive medicine. Duplicate tests, prescribing more drugs, and referring to more specialists provide a protection that offsets the anxiety of being sued.

Increased Utilization = Increased Cost

Increased supply, greater access to health care facilities, newly insured (previously uninsured), growing population, aging population, access to Medicare/Medicaid, new procedures and technologies, recommended increases in preventive guidelines/treatments, newer diseases and treatment categories, new drugs, and increased demand for them are all attributable to increased costs due to increased utilization.

Where is the Transparency?

The rapid adoption and growth of consumer-directed health plans makes it even more critical to have the information needed to compare costs and alternatives. Improvements in transparency will not only assist consumers, but would hold the market accountable. Without accountability for both price and quality, those who suffer the consequences are the consumers both in a general lack of understanding and financially.

We all play a significant role in containing health care costs. Are you doing your part? The expert team at Cornerstone can help you present quality, cost-saving, and creative solutions for your clients. Call us today to learn more.

 

Resources

https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/average-family-premiums-top-$20,000.aspx

https://www.goodrx.com/blog/brand-name-drugs-getting-more-expensive-july-monthly-report/

https://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.cdc.gov/nchs/data/factsheets/factsheet_nhanes.htm

https://www.hopkinsmedicine.org/news/media/releases/study_suggests_medical_errors_now_third_leading_cause_of_death_in_the_us

https://www.forbes.com/sites/realspin/2013/08/27/defensive-medicine-a-cure-worse-than-the-disease/#6a6c4e827c95

https://avalere.com/insights/us-healthcare-spending-projected-to-grow-5-5-annually-through-2027

https://www.statista.com/statistics/184914/prescription-drug-expenditures-in-the-us-since-1960/

https://www.statista.com/statistics/184914/prescription-drug-expenditures-in-the-us-since-1960/

https://www.prnewswire.com/news-releases/express-scripts-reduces-employers-annual-prescription-drug-spending-growth-rate-to-historic-low-in-2017-300594171.html

http://www.crfb.org/press-releases/fact-sheet-how-much-money-could-medicare-save-negotiating-prescription-drug-prices

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3068890/

https://www.healthitoutcomes.com/doc/billion-wasted-annually-due-to-inefficient-communication-technology-0001

CMS: Marketplace Agent and Broker Open Enrollment Office Hours

CMS will hold an informational session regarding Marketplace operations that may impact agents and brokers who are providing enrollment assistance to consumers. There will also be an open forum for participants to ask questions and share their observations from the Open Enrollment period.

DATE: Monday, November 25, 2019

TIME: 2:30 pm–3:30 pm

Register.

Grow your Business With The Standard’s Partnership Rewards Producer Bonus Program

The Standard

The Standard’s Partnership Rewards producer bonus program offers incentives for small business sales, as well as large cases, and rewards new and retained business. You can qualify for the program based on the total lines of coverage sold, as well as the level of premium, starting with a $25,000 minimum in new business and six lines of coverage. Or, for large cases, qualify with as few as three lines of coverage with total premium of $750,000 or more.

Note: Agility products will count towards the bonus!

Click here to learn more about the program.

Contact your Cornerstone representative with any questions.

Take Advantage of Principal’s Broker Bonus Program

Increase your earning potential with Principal. Place new business and retain business and you may be eligible for their group benefit bonus programs.

There are two types of bonus programs.

  1. Production bonus—Rewards you for placing business with Principal. The more you sell, the higher the bonus factor. You can qualify for a production bonus based on new sale credits.
  2. Premium persistency bonus—Rewards you for placing and keeping business with Principal. The more premium you retain, the higher the bonus factor.

Click here to learn more about Principal’s 2020 Bonus Programs.

Click here to learn more about Principal’s Privileged Partner Program

Contact your Cornerstone representative with any questions.

FormFire Introduces Condition Selector

In an ongoing effort to enhance the medical underwriting process while making our user experience as seamless and easy as possible, FormFire has made changes to the Employee Interview.

The Employee Interview now contains an easy-to-use categorized condition selection process, which allows employees to clearly state conditions they and their dependents have. This new enhancement allows tracking condition additions and removals on an individual basis.

Further, the employee certifies their family does not have any other conditions than those selected. Overall, this enhancement is a major step forward in FormFire’s Medical Health Questionnaire to allow easier tracking and reporting.

Contact your Cornerstone representative for more information.

Quoting the Ohio Chamber MEWA for Current UHC and AllSavers Group Customers

UnitedHealthcare (UHC) is not requiring applications at this time to review the suitability of current cases for the Ohio Chamber MEWA. See the linked PDFs below on migrating current business. Your Cornerstone representative submits these quote requests on your behalf to the UHC renewal contact. Please feel free to contact us with any questions.

Ohio Chamber MEWA Fully Insured Migration Checklist

Ohio Chamber MEWA All Savers Migration Checklist

October Medical Mutual Updates: Changing Payments, Deadlines, and Individual Market Updates

Medical MutualUpdating Medical Mutual Payments to Huntington Bank

Medical Mutual recently switched from PNC Bank to Huntington Bank for processing of premium and ASO-related payments. Group customers should now send payments to Huntington. Reminder letters will be sent to all affected groups ahead of shutting down the PNC Bank accounts prior to the end of the year.

COSE MEWA Columbus Territory Change

Effective November 1, 2019, the exclusive territory for the Columbus Chamber MEWA plan will expand beyond Franklin County and will include Union, Delaware and Licking counties. Any new group sold in those counties must be a member of the Columbus Chamber in order to enroll in the COSE MEWA health plan.

Two-Year Moratorium on Re-Entry to the COSE MEWA

Small groups choosing to leave the COSE MEWA and obtain other coverage will not be able to return to the COSE MEWA for two years. If a group wishes to return to the COSE MEWA before two years have elapsed, they will be charged a one-time fee of $1,000 per subscriber.

Pre-Submission Checklists

To help with submissions during the busy season, please complete your pre-submission checklist and send it in with your sold case documentation. Any submissions that are made after December 5, 2019, may not receive approval letters prior to the January 1, 2020, start date.

Health Insurance Tax

The federal government has not suspended the Health Insurance Tax for 2020, as they did in 2019. That means Medical Mutual will need to pass this tax along to their customers.

Medical Mutual Individual Market Updates

Medical Mutual will be offering ACA coverage in 12 new counties during plan year 2020. Click here to review the updated service area map. They have also added new $5,000 silver and $8,000 bronze deductible options that include office visit and Rx copays. Click here for the 2020 Plan Highlights flier for full details.

In addition, Medical Mutual has added statewide convenience walk-in clinics across Ohio and has expanded their Mercy HMO network with the addition of St. Luke’s hospital and more physicians.

Medical Mutual will discontinue the Promedica HMO network in Northwest Ohio. All members of that network will be moved to the Mercy HMO network.

Lastly, Knox Community hospital will no longer be a part of the OhioHealth HMO in Central Ohio.

Don’t forget to re-certify by the end of 2019 to receive renewal compensation for on-exchange plans!

Federally Mandated Fee Updated for 2020 Renewals

Since the Affordable Care Act went into effect in 2014, Medical Mutual has been subject to the Health Insurance Providers Fee, often referred to as the Health Insurance Tax or the Market Share fee. As a result, Medical Mutual has applied the Health Insurance Providers fee to all 2020 renewals.

Contact your Cornerstone representative with any questions about these updates.

Medical Mutual’s 2020 Small Group ACA Plan Grids Are Now Available

Medical Mutual’s updated plan grids, benefit highlight sheets, and Summary of Benefits and Coverage (SBC) documents are now available for the 2020 Small Group ACA rollout.

Updates to these plans include:

  • The elimination of the 1750 HSA plan. Current 1750 HSA members will be mapped into the 2800 HSA plan.

The addition of two HRA plans below:

  • Gold 5000 HRA with employer first contribution.
  • Silver 5000 HRA with employer second contribution.

Additionally, quoting for first quarter 2020 is now available in QRS. January 2020 renewals will be released soon.

MedFlex HMO Plan Options

2020 ACA Plan Options (Off Exchange)

Contact your Cornerstone representative for more information.

State Anthem Individual and ACA Groups Rx Change Coming

Members of Anthem’s Individual and Small Group Affordable Care Act health plans will move to their new pharmacy benefit manager, IngenioRx. Clients will receive letters regarding the change in November.

All Anthem members will use IngenioRx on January 1, 2020. Their pharmacy benefits don’t change as a result of the move to IngenioRx.

Members in most other plans, including grandfathered and/or grandmothered plans, already switched to IngenioRx.

Contact your Cornerstone representative with any questions.

Earn Up to $25,000 With Oscar’s National Open Enrollment Broker Bonus Program

With Oscar’s National Open Enrollment Broker Bonus Program, you can earn a one-time bonus of up to $25,000 on top of your regular commission. Here’s how it works:

  • Enroll or renew 50 to 249 policies and earn $20 per policy.
  • Enroll or renew 250 policies or more and earn $40 per policy for all policies.

That means that enrolling 250 policies can get you a bonus of $10,000!

Click here to learn more about the program.

Contact your Cornerstone representative with any additional questions.