Tuesday, March 17, 2009

What's really behind the cost of medical insurance?

Written and other media frequently blame the high cost of medical insurance on the compensation of company executives. These reports however do not bring out medical insurance premiums are simply a reflection of the high cost of medical treatment. Just as auto insurance companies charge more to cover a Jaguar vs a Honda Civic continually increasing medical treatment costs cause medical insurance premiums to go up.

Repeated reports, and there are many, about something that is not a real factor and which are constantly brought up, tend to be perceived as true. Thus, I want to bring out some of the real facts from a December 2008 survey.

+ For some years different organizations have reported 85% of medical insurance premiums go for costs associated with medical treatment. This new survey indicated it was 87%!

The survey also found:

+ Physician and clinical services accounted for 33% of all medical treatment expenses.

+ Hospital inpatient costs were 20% of the premium dollar

+ Hospital outpatient costs were 15% of the premium dollar

+ Prescription drugs amount to 14% of the premium dollar.

+ Other medical services were 5% of the premium dollar

+ Government payments, compliance costs, claims processing, and other
admin costs account for 6% of the premium dollar.

+ Consumer service, provider support and marketing were 4% of the
premium dollar

+ Insurance companies pocketed just 3% of the premium dollar.

A couple points about the just 3% finding:

+ Would any venture capital firm give financial support to a new business that said they planned to make 3%? I do not think so!

+ If some action were taken to change the 3% profit would it solve the problem of increasing medical insurance premiums? I certainly don’t think anyone would say yes.

The survey brought out the real issue behind medical insurance costs with words to the effect - continually increasing utilization of medical treatment plus new, more expensive treatment and increasing costs for current treatments are the things that have been the real cause of higher medical insurance rates.

Bottom Line: I want to encourage everyone who hears a statement – my medical insurance rates went up because of executive compensation – to say. What is really going on is people are using more medical treatment and the cost of these services have been increasing much faster than normal inflation.

Everyone is also encouraged to talk to medical treatment providers about the importance of making the real cost of their services available. Why? Only when we have what is called price transparency will we begin to have real competition among medical providers and thus achieve lower costs.

For example, in one part of the medical treatment world – laser eye surgery, which is normally not covered by medical insurance but is very open about treatment prices these rates have been falling. Proving that competition in the medical treatment field will work.

Sunday, March 01, 2009

Employees laid off Sept.1st or after can receive COBRA & mini COBRA coverage for 35% of the rate.

In summary new federal regulations will:

+ Allow individuals, laid off September 1st or after, to receive COBRA or Conn mini COBRA coverage for 35% of the normal rate.

+ Mean individuals enrolled in the new COBRA option will make their 35% payment to their former employer.

+ Enable COBRA employers, 20 or more employees, to be reimbursed for their 65% of the premium by taking a deduction from their next payroll tax payment.

+ The reimbursement for individuals enrolled in Conn mini COBRA will be done by the employers medical insurance company.

Some frequent questions:

+ How long can coverage for 35% be obtained? Nine months.

+ When can an individual start to receive coverage for 35%? March 1, 2009.

+ What if the laid off employee did not elect coverage when it was offered? They will receive a new notice of eligibility to elect coverage.

More details will be released soon by the Department of Labor.