Viewing entries tagged with 'Fact Check'
FACT CHECK: Health Plan Competition and Provider Consolidation
Posted by The Campaign on March 10, 2010 at 7:44 AM
Health insurance plans operate in highly competitive markets across the country and consumers have numerous choices in the types of plans and in insurers. To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans.
Key facts about health plan competition:
· There are eight or more health insurers in each of the top 40 metropolitan statistical areas (MSAs) in the nation.
· Physicians contract, on average, with about a dozen health plans. Only about half of their practice revenues come from health plan contracts while the rest comes from the federal government through Medicare and Medicaid.
· Aggressive competition among health insurance companies has also increased the number of product options available to both consumers and their employers. New types of products—like consumer-directed health plans, or HSAs—afford more choices, in addition to the many and varied PPO, HMO, POS, and indemnity options, both fully insured and self-funded.
· The states which are allegedly the most concentrated actually have some of the lowest health care costs in the nation.
· The list of participating insurance plans that are available through every state insurance department show that there are a variety of choices for consumers.
Additional information on provider consolidation:
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients”.
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated: “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.” The report also found that higher hospital prices do not translate to higher quality of care: “[A] narrow balance of the evidence and the evidence from the best studies indicates that hospital consolidation more likely decreases quality than increases it.”
· According to a brief from the National Institute for Health Care Management: “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· The Federal Trade Commission and the Department of Justice held extensive health care hearings in 2002 and 2003, and in their subsequent report noted the correlation between hospital concentration and high hospital prices: “Most studies of the relationship between competition and hospital prices have found that high hospital concentration is associated with increased prices, regardless of whether the hospitals are for-profit or nonprofit.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
FACT CHECK: Previous Medicare Advantage cuts caused seniors to lose their coverage
Posted by The Campaign on March 08, 2010 at 1:59 PM
FACT CHECK: Previous Medicare Advantage cuts caused seniors to lose their coverage
- According to CMS, enrollment in Medicare Advantage (then known as Medicare+Choice) experienced multi-year declines following enactment of the Balanced Budget Act of 1997.
- Between December 2001 and December 2002, Medicare Advantage enrollment declined by more than 900,000.
- From 1999 to 2003, nearly 2.4 million Medicare beneficiaries were impacted by plan withdrawals and service reductions. (Source: CMS Medicare Managed Care Geographic Service Area Reports)
What Happened Last Time: Following the Medicare Advantage cuts in the Balanced Budget Act of 1997, millions of seniors across the country saw higher premiums, a reduction in benefits, and loss of coverage:
- Medicare Cuts Threaten Florida HMOs (Orlando Sentinel, 1/31/1999)
"Now the Clinton administration is warning health-care providers that the president's proposed budget for fiscal 2000, due Monday, may call for even deeper cuts to Medicare...HMOs could also feel the pinch...If further cuts are made, more elderly and disabled people could lose their managed-care plans."
- Plunging HMO drug benefits leave Medicare patients in a pinch (The San Diego Union-Tribune, 2/27/2002)
"Beginning this year, however, HMOs placed a far heavier financial burden for drugs and other medical services on patients...The situation stems from limits imposed by federal legislation in 1997 that kept Medicare health plans from receiving health-cost reimbursement increases above 2 percent a year, despite soaring health care costs."
- Two More HMOs to Drop Medicare Patients in Louisiana (Times-Picayune, 7/16/1999)
"It is the second consecutive year that thousands of Medicare recipients have been displaced nationwide...after Congress voted to reduce reimbursements. Industry officials say more shakeouts are in the offing with another round of cuts on the horizon.
This year, Louisiana ranks behind only New York in the number of Medicare beneficiaries who will be forced to look elsewhere for the generous drug coverage and preventive health benefits of government-sponsored managed-care insurance."
- More Health Plans Quit Medicare; 711,000 Elderly, Disabled to Lose Broad HMO Coverage (The Washington Post, 6/30/2000)
- BCBS follows trend, drops area Medicare HMO (Jacksonville Business Journal, 9/13/2002)
"Even federal officials admit the program is underfunded. The Medicare Plus Choice program is in ‘bad shape,' said Thomas Scully, administrator of the Centers for Medicare and Medicaid Services."
- Dozens of HMOs Quit Medicare, Patients Face Upheaval (Washington Post, 10/4/1998)
- Seniors in California's Central Valley See Medicare HMO Options Reduced (The Fresno Bee, 3/20/2002)
- Elderly will be forced to change health plans as HMOs plan to withdraw from Medicare (The Philadelphia Inquirer, 6/29/2000)
- Medicare HMO Bills Will Grow: Premiums, Higher Fees Should Start by Jan. 1 (Orlando Sentinel, 11/5/1999)
"Since the cuts, health insurers have bailed out of the Medicare HMO business at alarming rates...The Medicare cuts are being felt most in states such as Florida with large numbers of retirees."
- Many H.M.O.'s For the Elderly Cut or Abolish Drug Coverage (The New York Times, 1/25/2002)
- HMO Cuts Coverage of 11,000 Seniors (The Boston Globe, 7/6/2000)
- California-Based HMO to Drop Medicare Coverage in Three Arizona Counties (The Arizona Republic, 6/30/2000)
FACT CHECK: Seniors in Medicare Advantage Receive Higher Quality Care
Posted by The Campaign on March 08, 2010 at 1:57 PM
Seniors in Medicare Advantage spent fewer days in a hospital, were subject to fewer hospital re-admissions, and were less likely to have “potentially avoidable” admissions, for common conditions ranging from uncontrolled diabetes to dehydration, according to an analysis of publicly available AHRQ data.
The study analyzed statewide datasets on hospital admissions in California and Nevada compiled by the Agency for Healthcare Research and Quality (AHRQ). The unique data in these states allows for direct comparisons of utilization rates among enrollees in Medicare Advantage plans and in FFS Medicare. These comparisons were adjusted for health status using the Medicare risk score process for age, sex, and 70 Hierarchical Condition Categories that are used as a basis for Medicare risk adjustment. Key findings from the report include:
- Medicare Advantage beneficiaries in California spent 30 percent fewer days in the hospitals than patients with FFS Medicare, and in Nevada, seniors in Medicare Advantage plans spent 23 percent fewer days in the hospital.
- Medicare Advantage enrollees were re-admitted to the hospital in the same quarter for the same condition 15 percent less often in California and 33 percent less often in Nevada compared to FFS Medicare.
- In both California and Nevada, seniors in Medicare Advantage were 6 percent less likely than seniors in FFS Medicare to be admitted to the hospital for conditions described by AHRQ as “potentially avoidable,” such as dehydration, urinary tract infection, or uncontrolled diabetes.
Press Release | Full Report (updated)
This analysis follows a previous AHIP study comparing utilization rates among patients in eight Medicare health plans compared to seniors in FFS Medicare. This study among seniors with certain chronic conditions also found that:
- Medicare Advantage beneficiaries spent an average of 18 percent fewer days in the hospital than seniors in FFS Medicare.
- Seniors in Medicare Advantage had an average of 27 percent fewer visits to the emergency room than those seniors in traditional Medicare.
- Seniors enrolled in Medicare Advantage health plans also experienced a 42 percent lower rate of hospital re-admissions than those seniors in FFS Medicare.
- Avoidable admissions to the hospital were 13 percent lower among seniors in Medicare Advantage plans than those in traditional Medicare.
Full Report (updated) | Slide
FACT CHECK: What They Are Saying About Health Plan Profits
Posted by The Campaign on March 08, 2010 at 7:39 AM
Independent experts and economists all agree -- health plan profits are not driving health care costs or premiums higher. Here are what some of the experts are saying:
Alwyn Cassil, Center for Studying Health System Change:
“‘…this idea that (taking) this $12 billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’” (Louisville Courier-Journal, Health insurers defend profits, 02/21/10)
Henry Aaron, Senior Fellow, Brookings Institution:
“‘Insurance company profits in the large picture have very little to do with the overall rising cost of health care,’ said health care expert Henry Aaron, a senior fellow at the Brookings Institution.” (ABC News, Health Insurance Profits: Not So Outrageous After All?, 11/10/09)
Kaiser Health News:
“With the nation’s health care spending estimated at $2.5 trillion this year, even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.” (Kaiser Health News, Ad Audit: What If?, 06/19/09)
Jeff Jacoby, The Boston Globe:
“To such overheated agitprop, the only useful response is a cold shower of facts, and the Associated Press supplied a timely one last week. For all the impassioned talk about obscene profits and bodies piling up, reports AP’s Calvin Woodward, ‘health insurance profit margins typically run about 6 percent’ of revenue, a return ‘that’s anemic compared with other forms of insurance and a broad array of industries.’” (The Boston Globe, Jeff Jacoby, Hyperbole in the health debate, 11/01/09)
Rick Newman, U.S. News & World Report:
“...on the whole, blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn’t all that profitable to start with.” (U.S. News & World Report, Why Health Insurers Make Lousy Villains, 08/25/09)
Steve Pearlstein, The Washington Post:
““Health insurance companies aren’t ridiculously profitable over time.” (The Washington Post, Weekly Q & A, 10/28/09)
Associated Press:
“Health insurance profit margins typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.” (Associated Press, FACT CHECK: Health insurer profits not so fat, 10/25/09)
Dr. Peter Kongstvedt, Economics Professor, George Mason University:
“Insurance companies are not the major drivers of cost inflation.” (CBS News)
Ezra Klein, The Washington Post:
“...it’s hard to see how [health plan profit margins of 3.3%] are a primary driver of health-care spending, much less the growth in health-care spending.” (The Washington Post, Ezra Klein, Profits and the Insurance Industry, 09/10/09)
Rick Newman, U.S. News & World Report:
“Some reformers want health insurers to simply hand over a chunk of their profits to help lower premiums and overall healthcare costs. The Senate Finance Committee bill, for instance, would levy a $6.7 billion annual fee on insurers to help pay for reform, in addition to fees on drugmakers and device manufacturers. But insurance companies aren’t the cash cows some imagine them to be. The profit margin for health insurance companies over the past year was 3.4 percent, according to the research firm Morningstar. That’s better than the median of 2.2 percent, but it ranks only 87th out of 215 industries. Drugmakers, by contrast, have a profit margin of 16.4 percent.” (US News & World Report, Why More Competition Won’t Fix Healthcare, 10/29/09)
The New York Times:
“The president said that health insurance companies were making ‘record profits.’ America’s Health Insurance Plans, the main lobby for insurers, contends that ‘for every $1 spent on health care in America, approximately one penny goes to health plans’ profits.’” (The New York Times, Experts Dispute Some Points in Health Talk, 07/23/09)
Les Funtleyder, Health Care Analyst:
“‘2008 was a terrible year. So the comparisons, while numerically correct, leave out a bit of context.’ Health care analyst Les Funtleyder at Miller Tabak says millions of people lost coverage last year because they lost their jobs, not because insurers purged their rolls.” (Marketplace, Insurer profits rise while coverage falls, 02/12/10)
Bill Frezza:
“If you took all the profits that all the health insurance companies made in 2009 and used them to pay for medical care in 2010 you would cover the country's medical bills for ... two days. Then what?” (RealClearPolitics.com, Why Washington Can't Reform Healthcare, 02/15/10)
FACT CHECK: Putting Health Plan Profits in Perspective
Posted by The Campaign on March 08, 2010 at 7:32 AM
Health plan profits continue to be a focus of the reform debate. Here are some important facts about health plan profits:
Analyzing 13 of the 14 health plan companies on the Fortune 500 list (these 13 have filed their initial year-end financial statements with the SEC) the profit margin for these 13 companies averages 3.19 percent for 2009 -- for 2008 it was 2.3 percent for these same 13 companies.
- Six of the 13 companies actually saw a decline in their profit margin - averaging a decline of 48.7% in profit margin from 2008 to 2009.
For the five largest health plans (determined by market cap), the average profit margin for 2009 is the second lowest from 2005-2009 - 2008 was the worst year.
- 2009 - 5.2% (4th)
- 2008 - 3.2% (5th)
- 2007 - 5.6% (2nd)
- 2006 - 5.4% (3rd)
- 2005 - 6.4% (1st)
According to Yahoo! Finance's analysis of the latest quarterly data, the net profit margin for the entire health care sector is 13.26%. Using the same index, health plans have a 4.3% net profit margin - 208% less than the entire health care sector.
According to Yahoo! Finance's analysis of the latest quarterly data, the net profit margin for drug makers was 21.3% compared to 4.3% for health plans - 395% less.
According to Fortune Magazine, the health insurance industry had a profit margin of 2.2% in 2008, ranking them 35th on the Fortune list of industry profits. This is below pharmaceuticals (#3, 19.3%), medical products and devices (#4, 16.3%), and medical facilities (#34, 2.4).
5 drug companies had profit margins of more than 20%
14 companies had profit margins of more than 10% -- which is more than double the health plan industry average
The average profit margin for health plans 3.19% vs. 18.67% for drug companies
The highest profit margin health plan company: 7.3% vs. 47.48% for a drug company.
One company had more profits than the entire health plan industry
The top two highest profit drug companies had almost double the entire profits for the health plan industry
Click here for a document putting health plan profits in perspective.
FACT CHECK: Health Insurance Premiums -- Rate Determination and Review
Posted by The Campaign on February 24, 2010 at 7:38 AM
Health Insurance Premiums: Rate Determination and Review
Overview
The vast majority of states tightly regulate premium rates for the individual and small group markets throughout the lifetime of a policy. In those states, health plans are required to file their proposed rates with the insurance regulator and state insurance regulators carefully review these rates to ensure that they are neither inadequate nor excessive.
How are premium rates determined?
State law requires that health plans ensure the premiums collected are sufficient to cover the medical costs of their customers, or they risk financial insolvency. A health plan's actuarial team reviews historical and current data to determine necessary rates, including:
- Known past experience
- Demographic and trend projections
- Predictions of future utilization and costs (based on historical and current data).
How are premium rates reviewed?
The rate filing requirements are set by state laws and provide the state insurance regulator with an opportunity to review the proposed rates. According to the NAIC, "there are 29 states that have prior approval of rates and a number of other states that have other tools for influencing insurers to hold down rate increases."1
State insurance regulators carefully review premium increases for:
- Sufficiency: Are the rates neither insufficient nor excessive in relation to the benefits provided?
- Fair and reasonable: Are they reasonable, not inadequate or unfairly discriminatory?
- Solvency: Will the rates be too low and unable to cover expected medical costs?
- Regulatory compliance: Do the premiums charged comply with all state rating rules?
- Actuarial principles: Do the premiums reflect accepted actuarial principles?
- Adherence to state mandates: Do the benefits provided follow coverage mandates as set by the state?
A state insurance regulator requires a health plan to justify rates by providing:
- A general description of the base rate that the company intends to charge -- this will include a detailed description of actuarial projections.
- A description of the rate increase (if rates are being increased) and a detailed description of the factors that the company used to determine the necessity of the increase.
- The company's projected experience for the appropriate period-generally, this will be at least five years for, and may be for the projected life of, an individual policy, and one year for small group policies.
- Changes in assumptions the carrier makes based on benefit design requirements or mandates.
- Changes in factors, such as demographics for the block of business.
FACT CHECK: Health Plan Competition and Provider Consolidation
Posted by The Campaign on February 23, 2010 at 2:31 PM
Health insurance plans operate in highly competitive markets across the country and consumers have numerous choices in the types of plans and in insurers. To the extent that research has raised the question of competition as a factor in rising health care costs, it has pointed to consolidation among providers, not health plans.
Key facts about health plan competition:
· There are eight or more health insurers in each of the top 40 metropolitan statistical areas (MSAs) in the nation.
· Physicians contract, on average, with about a dozen health plans. Only about half of their practice revenues come from health plan contracts while the rest comes from the federal government through Medicare and Medicaid.
· Aggressive competition among health insurance companies has also increased the number of product options available to both consumers and their employers. New types of products—like consumer-directed health plans, or HSAs—afford more choices, in addition to the many and varied PPO, HMO, POS, and indemnity options, both fully insured and self-funded.
· The states which are allegedly the most concentrated actually have some of the lowest health care costs in the nation.
· The list of participating insurance plans that are available through every state insurance department show that there are a variety of choices for consumers.
Additional information on provider consolidation:
· Massachusetts Attorney General Martha Coakley recently issued a report on hospital consolidation in the state. According to a recent Boston Globe story, the report “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients.”
· According to a new report in Health Affairs, Paul Ginsburg and Robert Berenson found that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.”
· A report from the Robert Wood Johnson Foundation found that hospital consolidation has contributed to rising health care costs. The report stated, “Research suggests that hospital consolidation in the 1990s raised inpatient prices by at least five percent and likely significantly more. Prices increase 40 percent or more when merging hospitals are closely located.”
· According to a brief from the National Institute for Health Care Management, “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services. The magnitude of price increase varies by methodology and by the characteristics of the markets under study, ranging from low-end estimates of 5 percent price hikes to increases of more than 50 percent.”
· Recent reports show how much hospital consolidation has increased in recent years, indicating that:
o The vast majority (88 percent) of U.S. Metropolitan Areas have highly concentrated hospital markets.
o Hospitals markets have increased their concentration by 47 percent over 13 years.
Capps paper on AMA data
AHIP recently submitted a report to the DOJ and FTC on the Horizontal Merger Guidelines Review Project that calls into question the AMA data on concentration. The paper, “Federal Health Plan Merger Enforcement is Consistent and Robust,” written by Cory Capps, PhD, of Bates White, LLC is available here: http://www.ftc.gov/os/comments/horizontalmergerguides/545095-00009.pdf. In our cover letter we said the following:
“…the American Medical Association market share and concentration figures (“AMA data”), which have been offered by the AMA for a number of years, are plagued by a number of significant limitations and appear to be unreliable. Most critically, the data are incomplete and omit various competitive alternatives, with the result that the market share figures do not reliably reflect the actual state of competition in such markets. While market share data are only a starting point, the review of any merger, in any industry, depends critically upon the use of accurate data. Simply put, the AMA data are no substitute for the DOJ’s practice of relying upon actual data from actual markets, and the use of these data in advocacy efforts demonstrates the danger of detaching merger analysis from specific, and accurate, market facts.”
“…critics have offered no evidence that lower payments to healthcare providers or lower quality healthcare have resulted from health insurer mergers generally or from any specific health insurer merger. Indeed, the evidence reviewed in the Capps Paper suggests that increased payments to providers of healthcare goods and services account for all or nearly all of the premium increases over the last decade. While general facts do not determine the results of individual merger reviews, this fact may be informative as DOJ and the FTC determine where to focus their enforcement resources.”
Fact Check: Putting Health Plan Profits In Perspective
Posted by The Campaign on February 12, 2010 at 12:10 PM
Facts about health plan profits:
- Analyzing 9 of the 14 health plan companies on the Fortune 500 list from 2009 (these 9 have filed their initial year-end financial statements with the SEC) the profit margin for these 9 companies averages 3.9 percent for 2009 -- for 2008 it was 3.1 percent for these same 9 companies.
- Five of the nine companies actually saw a decline in their profit margin – averaging a decline of 47.2% in profit margin from 2008 to 2009.
- For the five largest health plans (determined by market cap), the average profit margin for 2009 is the second lowest from 2005-2009 - 2008 was the worst year.*
- 2009 - 5.2% (4th)
- 2008 - 3.2% (5th)
- 2007 - 5.6% (2nd)
- 2006 - 5.4% (3rd)
- 2005 - 6.4% (1st)
- According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11.1%. Using the same index, health plans have a 3.4% net profit margin – 226% less than the entire health care sector.
What Others Say About Health Plan Profits
- Ezra Klein: “...it’s hard to see how [health plan profit margins of 3.3%] are a primary driver of health-care spending, much less the growth in health-care spending.”
- Henry Aaron, Brookings Institution: “Insurance company profits in the large picture have very little to do with the overall rising cost of health care.”
- Dr. Peter Kongstvedt: “The insurance companies are not the major drivers of cost inflation…”
- Kaiser Health News: “With the nation’s health care spending estimated at $2.5 trillion this year, even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.”
*Source: Analysis of SEC Data
FACT CHECK redux: The Facts About Health Plan Profits
Posted by The Campaign on February 11, 2010 at 7:05 AM
Health plan profits continue to be a source of debate in the larger conversation about health care reform. While there has been focus on the levels of profits, many independent experts continue to note that health plan profits are not a key driver of increasing health care costs. Below are some key points on health plan profits and fact checks setting the record straight:
Fortune 500 puts the health plan industry profits at 2.2%, 35th on the list. This is below other sectors of the health care industry. Click here for the full list.
For every dollar our nation spends on health care, less than one penny goes towards health plan profits. A sincere cost-containment discussion would focus on the other 99 cents. Check out this document which sets-the-record-straight about health plan profits.
ABC News reports on the attempt of some to vilify health plans by focusing on health plan profits, but as this article points out profits are neither as high as some claim nor are they the main driver of health care costs.
- “…the companies' profits still represent a miniscule percentage of the $2.5 trillion Americans spend every year on health care.”
- “‘Insurance company profits in the large picture have very little to do with the overall rising cost of health care,’ said health care expert Henry Aaron, a senior fellow at the Brookings Institution.”
The AP does a quick fact check on the claims about health plans’ profits. The article notes that many of the claims being used in the debate are misleading and in some cases wrong. - “Quick quiz: What do these enterprises have in common? Farm and construction machinery, Tupperware, the railroads, Hershey sweets, Yum food brands and Yahoo? Answer: They're all more profitable than the health insurance industry.”
- “Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.”
- “…in pillorying insurers over profits, the critics are on shaky ground.”
According to Ezra Klein, a blogger for the Washington Post:
- "The insurance industry is not a particularly profitable industry."
- Health plans are "...the 86th most profitable industry as measured by profit margins, with an average margin of 3.3 percent."
- "...it's hard to see how [health plan profit margins of 3.3%] are a primary driver of health-care spending, much less the growth in health-care spending."
Fact check: What causes premiums to increase?
Posted by The Campaign on February 10, 2010 at 5:50 AM
Premiums increase when the cost of medical services go up. Government data show that in 2009 rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. Unless steps are taken to address the underlying cost of medical care, health care costs will continue to grow at an unsustainable rate, making it even more difficult for families and small businesses to maintain health care coverage.
New Health Spending Projections
New health spending projections released by CMS last week found that health care’s share of the economy grew 1.1 percentage points in 2009 – the largest one-year increase in GDP share since the federal government began keeping track in 1960. The report, published in Health Affairs, notes that the “two primary drivers of growth…are medical prices and utilization”, which saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:
* “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
* “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
* “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
AHIP Letter on Factors Contributing to Premium Increases
AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. Here are a few highlights:
* These data show that increases in premiums are driven by the growth in the cost of health care services and that plan administrative costs are rising at far lower rates than the cost of care.
* With respect to specific cost factors, our health plans project that the underlying trends in health care service costs will continue into the future and adversely affect 2010 premium levels. Specifically, our plans are reporting:
* sharp increases in hospital and physician rate requests,
* increases in outpatient surgery costs,
* increased billing for more services provided per emergency room visit,
* increases in the use and cost of specialty drugs, and
* increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients during this economic downturn.
* As the number of uninsured Americans increases, health plans also report seeing an increase in uncompensated care associated with emergency room visits by persons who have no coverage and are unable to pay for the services they receive.
* In a number of markets, consolidation among hospitals and other health care providers also is increasing costs and health plans are reporting higher rate increases from provider systems or hospitals and medical groups with dominant positions. Indeed, approximately 82% of metropolitan areas in the United States have “highly concentrated” hospital markets under guidelines used by the Department of Justice and the Federal Trade Commission.
* A wide range of new state laws – including benefit mandates, regulations, and premium taxes – are contributing to higher health care costs for small employers.
* The current economic downturn is another issue that is playing a role in small employer health care costs. At a time when many small businesses are financially strained, our plans are observing that some companies with young, healthy workforces have stopped offering coverage. Another related trend is that as it becomes more difficult for small employers to continue offering coverage, some are forced to reduce the portion of the premium they cover and increase employee cost-sharing. In response to these decisions, more employees – usually those with below average health costs – are declining to participate. Similarly, few employers are hiring young, less experienced workers because of the weak economy, while others have been forced to lay off workers hired within the past several years. The net impact of these developments is that the remaining risk pool is more heavily weighted with older, less healthy persons, resulting in higher average costs per enrollee for those who maintain coverage.
