Managing Rising Health Insurance Costs
Greetings friends and neighbors.
Have you noticed? Inflation is front and center on the minds of an overwhelming number of Americans. Today’s headlines are littered with articles citing the rising costs of everything from a cup of coffee to your favorite team’s quarterback.
Specifically, let us not overlook healthcare inflation. It has been out of control not just as a post pandemic but for the past 40 years. The figures have been unconditionally perpetrated in conjunction the healthcare industry, along with the big 4, Blue Cross, United-Healthcare, Cigna, and Aetna. “BUCA’s” The “BUCA’s” doctrine. Trend increase or medical inflation is 1% per MONTH. Yes 12% annual increases are baked into their way of doing business. Please ask yourself what other item, good or service increases at this alarming rate?
Many of you are familiar with the “Rule of 72”. It is a simple formula, quick calculation, to determine how many years it will take for an investment to double in value based on the rate of return. If your investments earn 8% annually your portfolio would double in 9 years. 72 divided by 8%
Conversely, consider medical inflation at 12%, the cost doubles in 6 years.
The BUCA’s all claim to have 50% discounted costs to actual billed charges for services from office visits, complex surgeries and extended hospitalization stays. Here is the secret. It is a 50% discount on the made-up figure. The “cost” is derived from what is known as the chargemaster. Each hospital determines its own chargemaster prices for thousands of services its providers perform. Hospitals use their chargemaster prices to negotiate reimbursement rates with private payers; the kicker is the prices are always significantly higher than the actual costs of care.
Believe me, it goes deeper. Let me share three real client examples.
• Insured was billed $800 for a nasal sanitation device. BUCA says it will allow for a 50% “discount” of $400. Sounds reasonable and even rational. However, upon review -audit it was discovered that device was a simple box of Kleenex.
• Our client – employee was not with a BUCA. He was scheduled to have neck surgery. Hospital- Chargemaster stated $104,000 cost. Turns out they were willing to accept “only $55,000”.
Interesting note: had the employee been on Medicare the hospital would have received $18,000. We rolled up our sleeves and offered 120% of Medicare. Surgery was performed with a payment of $21,600. $34,000 in real savings.
• Insured was on Humaira, monthly cost to plan is $6,000. Humaira manufacturer pays for the one-month dose and then insured has met their annual max out of pocket for the year. No more expenses for insured for the remainder of the plan year. Translation the next 11 months are now being paid by the employer’s health plan. These high claims lead to larger than 12% renewals.
• Consider, Humaira is now off patent. Why are the BUCA’s still “allowing” high $6,000 monthly cost? The secret is that “PBM’s” pharmacy benefit managers for each of the BUCA’s are a profit center. They have no incentive to stop reaping thousands of dollars in “Rebates” for each script filled.
It was mentioned in a previous article, since 1985 United Healthcare’s, stock appreciation is 220,000% We at Providence Benefit Solutions represent small, medium, and large employers that are offering a wide range of employee benefits. Our goal is finding creative ways to combat insanity. This is the front and center of our mantra. Push back and advocate for our clients and in turn together we can make a meaningful impact on overall costs. We welcome the opportunity to discuss our proven strategies with you and your team.
