This is the question that’s at the heart of the matter. And it’s
what we need to understand before we can try to control costs.
It’s important to look at the real drivers behind high and rising
health care costs and health care premiums.
More expensive technology, used more often — No
doubt, modern medicine is amazing and can save lives.
And as better tests and more expensive equipment
and pharmaceuticals emerge, we can expect to see an
increase in the use of these services. Technology is the
key driver of health spending, accounting for an estimated
half to two-thirds of spending growth.
Inflation — Just as we spend more today for a gallon of
milk than we did 20 years ago, we spend more today for
the same medical services than we did in years past. This
medical price inflation outpaces general inflation and is
driving 51% of the growth in health care spending.
Cost shifting — When government programs like Medicaid
and Medicare underpay for medical services that patients
receive, private insurance companies have to pick up the
balance. A 2008 report — issued by an independent firm that
researches health care trends — estimates the total annual
cost shift from Medicare and Medicaid to private insurers is
more than $88 billion. The report also estimates cost shifting
accounts for $1,788 of the annual health care costs for a
typical family of four, or 10.7% of their total costs.
Government Regulations —
Private health insurers spend over $339.2 billion in order
to comply with government health care regulations. While
we spend some of this money paying for benefits that
we’re required to cover like certain screenings and certain
prescription drugs, more than half of the money is spent on
regulatory costs such as filing and reporting requirements.
Patient lifestyles — Increasing numbers of patients
who are challenged by obesity, smoking, drug abuse,
poor nutrition and physical inactivity contribute to an
increase in the use of, and therefore the cost of, health
care services.8 These preventable risk factors9 can also
contribute to chronic diseases, which account for 75% of
the money spent on health care in the U.S. each year.
Obesity — The percentage of obese adults now
exceeds the percentage of healthy weight adults.
Tobacco use — One in five adults smoke.
Sedentary lifestyle — Less than one-third of adults
report getting regular exercise.
Poor nutrition — One in six adults has high cholesterol
This is going to be very interesting to see how the grandfathered plans are treated from a carrier standpoint. It’s very possible that these plans could cost less than the new generation of plans that will be launched under the health care reform.
The next few years these grandfathered plans either group or individual could become very valuable. If you have a plan where the premium is 35% lower than market condition you will not want to let that plan go.
What is a “grandfathered” health plan?
A “grandfathered” health plan is any group health plan or individual coverage that was in effect on the date of the Acts’ enactment on March 23, 2010. “Grandfathered” status is important under the Acts as certain provisions of the Acts do not apply to grandfathered plans (or at least to many participants under “grandfathered” plans), or apply to such plans at a later date. There remain many questions regarding “grandfathered” plans and the extent to which “grandfathered” status will apply
What provisions of the Acts apply to “grandfathered” health plans
The following lists some of the key provisions of the Acts that apply to “grandfathered” health plans with plan years beginning on or after September 23, 2010:
- Dependent Coverage Until Age 26 – The Acts require group health plans (including “grandfathered” health plans) that cover dependents to provide coverage for dependent children until they reach age 26, regardless of student status or marital status. However, for plan years beginning before January 1, 2014, coverage need not be offered by a “grandfathered” plan if a dependent is eligible to enroll for coverage under another employer-sponsored group health plan.
- Restrictions on Annual and Lifetime Limits – Group health plans (including “grandfathered” health plans) may not impose lifetime limits or “unreasonable” annual limits on the value of “essential benefits” for any plan participant or beneficiary.
- Prohibition on Retroactive Cancellation of Coverage – Group health plans (including “grandfathered” health plans) may not retroactively cancel a participant’s coverage once the participant is enrolled in the plan unless the individual has engaged in fraud or made an intentional misrepresentation of a material fact.
- Restrictions on Preexisting Conditions – The Acts mandate that group health plans (including “grandfathered” health plans) may not impose any preexisting condition exclusions for eligible children under age 19.
It is very possible if these are the only acts that are imposed on the grandfathered health plans they very well might end up costing much less.
What provisions of the Acts do not apply to “grandfathered” health plans?
“Grandfathered” health plans are excluded from the following provisions of the Acts so long as the plan maintains its “grandfathered” status:
- Preventative Care Benefits – For plan years beginning on or after September 23, 2010, the Acts require that group health plans (other than “grandfathered” health plans) offer certain preventative care benefits, such as immunizations and breast cancer screening, on a first-dollar basis, without cost to participants.
- Nondiscrimination Testing – Currently, the existing Internal Revenue Code rules for nondiscrimination testing apply only to self-insured plans. For plan years beginning on or after September 23, 2010, the Acts require that fully-insured health plans (other than “grandfathered” health plans) apply the same nondiscrimination tests in an effort to discourage plans that cover only high-ranking employees.
- External Review of Claim Denials and Appeals – For plan years beginning on or after September 23, 2010, group health plans (other than “grandfathered” health plans) must provide a mechanism in their claims procedures for an external review process, among other things.
Since these acts do not apply these plans should cost the carriers less in claims which means less in premium for the policy owner.
Time will tell.
Every year Hoosiers experience increasing Health Insurance Premiums. As Insurance Providers absorb the cost of claims premiums tend to go up. Insurers increase premiums among the healthy to offset the cost of claims from the unhealthy. As healthy people change jobs or switch insurance carriers the remaining people in the group are left to pick up the tab. This is called the Death Spiral. How can an individual or a group stay away from this? The answer is simple…Control. Taking control of your health care is the key. Using a broker to find the health care plan that is the most economical while maintaining a necessary level of coverage is essential. Weather you are Self Employed or part of a large group there is relief. Take control of your Health Care and get on track to lower your premiums.
