According to a Kaiser Family Foundation’s report, the average cost of an employer-sponsored family health insurance plan is up 131% over the last decade—a period in which inflation rose only 28%. And one estimate says that premiums could increase another 166% in the decade ahead. Pretty scary for an employer, right? Joining a PEO like us is an easy way to alleviate the stress associated with the changes in healthcare, and could even save you money. Contact us to find out more about the ways we can help you.
Below, we examine some of the factors that contribute to the increase in medical premiums.
1. Changes in patient expectations
At one time, medical insurance covered only major medical events, and now it covers nearly everything. Since the patient pays fewer costs directly, there is little incentive to control costs. And with more and more claims being processed, administrative costs rise accordingly.
2. Increased visits to higher-paid specialists
The "Archives of Internal Medicine" reports that the specialist referral rate has more than doubled since 2000. Reasons for this include: a) the primary care physician’s lack of time to delve more deeply into the patient’s issues, and b) fear of lawsuits if they don’t make the referral.
3. The Affordable Care Act (ACA)
According to Forbes Magazine, federal and state mandates of the ACA are adding 25-45% to the premiums of employer-sponsored plans.
4. Fraud, misappropriation, and errors
The largest single loss category for health insurance carriers is fraud, perpetrated either by healthcare providers or by patients. The system is so cumbersome that it is more expensive to investigate than pay the claim.
Increasing premiums are also partly due to mis-handled claims. The American Medical Association has estimated that up to 20% of health insurance claims are handled incorrectly and that $778 million could be saved annually for every one percent decrease in improperly processed claims.
5. Malpractice insurance and defensive medicine
An article published by WebMD claims that an estimated 37% of malpractice lawsuits involve no medical errors, yet in today’s increasingly litigious society, no practitioner can afford to be without coverage. The speed with which new technology and new pharmaceuticals are developed, tested, and used has significantly increased the number of lawsuits. And, in an effort to prevent lawsuits, physicians are ordering more and more expensive procedures as a precautionary measure.
According to Aetna Insurance, anywhere from 35% to 65% of the increase is due to new technology. It takes large sums of money to develop new technology and new drugs, and these costs pass on to the consumer, either directly or through higher insurance premiums.
7. Increased consolidation of hospital industry
The Robert Wood Johnson Foundation published a study in 2012 showing that hospital price increases exceed 20% when mergers occurred in concentrated markets.
8. Unhealthy lifestyles
A well-known factor in the cost of healthcare is personal lifestyle choices. A 2014 Gallup Poll found that 27.7% of Americans are obese, up from 27.1% in 2013. And the Center for Disease Control reports that smoking accounts for at least $133 billion in annual medical costs for adults.
Let us help
Few of these factors show any signs of dwindling, and understanding them doesn’t help much in dealing with the costs. It is more important than ever to be sure you are getting the best medical plans for your company. Let us help you control costs as much as possible.