SilverLink - Winter 2008 - (Page 26)

The primary purpose of medical trend is to estimate what today’s health insurance plan will cost in the following year. For example, a 10% trend factor for a plan that costs $7,000 per employee per year in 2007 would result in an annual cost of $7,700 per employee in 2008. When evaluating medical trend, it can be helpful to focus on the key components driving healthcare costs. In 2006, the largest component was physician services at 36%, with hospital services at 30%, outpatient services at 16% and prescription drugs at 14%. What Trends Are Expected in 2008? A study completed by five of the largest national health insurance carriers indicated that medical trend should be lower in 2008 in comparison to 2007. While it is still too early to evaluate the impact of consumer-driven plans, health insurance carriers indicate that these plans are tracking roughly 2.5% below HMO and PPO plans. Type of Plan PPO HMO/POS Consumer Directed Health Plan 2007 11.9% 11.8% 10.7% 2008 9.9% 9.9% 7.4% Prescription Drugs 14% Hospital Services 30% Other Medical Services 4% Looking Ahead Over the next several years, the following factors will be critical in helping to offset increases in medical trend. 1. Prescription Drug Utilization—With increases in generic and mail-order utilization, brand name drugs coming off patent and new over-the-counter medications, pharmacy trend should continue to decrease. 2. Consumer-Driven Healthcare—Plans with higher deductibles and the removal of copayments are becoming a more common offering. This results in increased transparency and cost-sharing to the end user, which should help lower utilization and medical trend. Outpatient Services 16% Physician Services 36% 3. Total Healthcare Management—A more common strategy has been to focus on wellness initiatives and disease management. The objective of these programs is for healthcare consumers to be more proactive. Such programs also provide resources for members to live healthier lifestyles and assist them with managing chronic and/or ongoing illnesses. Studies have indicated these programs help lower future medical costs. An increase in medical trend does not necessarily result in increased insurance premiums. Employers have typically altered benefits offered to employees to counteract medical trend. Common cost-saving plan changes include increasing deductibles and copayments. It may also be assumed that health insurance premiums can be impacted by other factors unrelated to medical trend, such as disease management and wellness programs. 4. Electronic Healthcare Access/Increased Technology— A higher frequency of claims being submitted electronically should result in lower administrative costs. Also, with an increase in available technology, members should experience greater accessibility to health records and valuable information to assist them in proactively managing their healthcare and reducing unnecessary services. Ultimately, these factors should assist in slowing down medical trend. contact scot t siMon at 402.96 4.5 46 4 or ssiMon @ ssgi.coM 26

Table of Contents Feed for the Digital Edition of SilverLink - Winter 2008

SilverLink - Winter 2008 Contents Risk Management: Where in the World is Human Resource Consulting? Workers’ Compensation Rate Declines Insurance Certificates Haute Retirement It All Began with a Cup of Coffee Playing Fair in the Housing Market Captives 101 Proceed with Caution Fore! (Or is it Pull? or Giddyup?) Don’t Be Fuelish Employee Benefits: Medical Trend Countdown to Compliance Private Client Services: Buy & Sell Agreements Flood Insurance Pushing Wealth to the Next Generation Client Spotlight: Travel and Transport Internal Happenings: SilverStone Group Giving Back Since 1945

SilverLink - Winter 2008

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