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What Does Healthcare Really Cost?

Posted by Laura McMullen on Fri, Jun 10, 2016

The Affordable Care Act primarily addressed the cost and availability of health insurance. What about the cost of healthcare? An Unprecedented Look at Medical Costs Nationwide talks about The Health Care Pricing Project, which is looking at exactly that.

Researchers from Yale University, Carnegie Mellon University, and the London School of Economics examined $682 billion of healthcare bills for 88 million people from Aetna, Humana, and UnitedHealth. The study was funded by The Commonwealth Fund, National Institute for Health Care Management Foundation, and Economic and Social Research Council.

Here are some highlights from their first paper, The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured:

  • “If you happen to live in an area with only one hospital you are going to pay more.”
  • “After decades of mergers, nearly a third of US markets have monopolies, or are close to having monopolies.”
  • Variation in provider price drives spending differences across Hospital Referral Regions for employer-sponsored insurance. Variation in quantity of care provided drives spending differences in Medicare.
  • Prices vary widely across the nation and significantly even within Hospital Referral Regions.

How does the variation in prices of health care services and it's influence on spending levels across the nation impact your organization?

 

Tags: health insurance, Healthcare, ACA, insurance companies, medicare, medical insurance

Pros and Cons of Health Insurer Mergers for Employers

Posted by Laura McMullen on Wed, Aug 05, 2015

mergerAetna acquires Humana. Anthem acquires Cigna. Centene acquires Health Net. Assurant Health is bought by National General. These are big moves that are creating bigger companies in an already huge $2.9 trillion industry. There’s been lots of analysis about the acquisitions, like this Modern Healthcare article from July 2015 that explains how gaining more Medicare Advantage business is the purpose of these mergers, but the perspective that I’m finding most interesting is what employers are saying.

Consolidations Are a Mixed Blessing

A Business Insurance article published after the Aetna/Humana and Centene/Health Net deals were announced described the results of an Aon Hewitt employer survey of nearly 100 employers. Jim Walker, Aon Hewitt’s global chief innovation officer for health and benefits consulting, wasn’t surprised at the results. “On the one hand, consolidation will give insurers more clout in negotiating with health care providers. On the other hand, employers are concerned that fewer and bigger health insurers will mean they have less leverage in negotiating with insurers.” Here are some of the top line results of the survey:

  • Three-quarters of the employers surveyed thought the impact would reduce options or have no effect.
  • More than half said they were considering changes to their health plan strategies.
  • More than three-quarters said the industry consolidation would not affect their short-term decision-making about retiree options.

Another Business Insurance article published a week later, after the Anthem/Cigna deal was announced to result in the nation’s biggest health insurer, offered similar perspective. Here are a few quotes:

“From the employer side, the deal can be ‘good news,’ if the much larger Anthem can ‘cut better deals with medical providers,’ concurs Dave Osterndorf, a partner and chief health care actuary at Health Exchange Resources in Mequon, Wisconsin.”

“Adding Cigna's book of business ‘may rebalance provider negotiation leverage in Anthem's favor after years of provider consolidation that has gone pretty much under the radar screen,’ says Brian Marcotte, president of the National Business Group on Health in Washington. “Large employers will have concerns about the merger between Anthem and Cigna because employers will be left with only three major insurers who can support large multi-state employers on a nationwide basis.”

PricewaterhouseCoopers predicts medical cost trend to increase 6.5% in 2016, with a projection of 4.5% after benefit design changes, in their Behind the Numbers 2016 report. The trend is increasing more slowly than in years past although healthcare costs continue to outpace inflation so employers are understandably still interested in reducing the impact of healthcare costs in their bottom lines.

Balancing Cost and Choice

I’ve written that headline a million times in my healthcare career. Most of the time, I’ve been describing benefit options to employees but it applies to the choice facing employers as well. They want to offer health insurance for a variety of reasons – the other companies in their industry offer it, they’ve always offered it, healthy employees are more productive than sick employees, etc. As the costs continue to rise, employers hold the line on their costs and shift more to the employees through higher deductibles and more premium cost-sharing.

The mergers and acquisitions we’re seeing now are bringing that choice to the forefront again for employers. Which way are your customers leaning?

Tags: health insurance, healthcare reform, healthcare benefits, health insurers, medicare, medical insurance, health insurance mergers

 

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