Health Care and Cost Trends for 2008

The year 2008 is now upon us and fast moving toward mid-first quarter. January is almost over, and February is just a few days away. It seems that the older we get, the faster time goes by. With the days of youth, we feel that we will live forever. But as we get into more mature years, we begin to feel our mortality a little bit more every day that we live. As old "Blue Eyes" was famous for singing in The September Song, "It's a long, long way from May to December..", and when we reach the September of our lives we do have a precious few days. That's why we need to take action on health care trends that make sense. Let's make the most of the days we have whether long or short. As the Latins said, "Carpe Diem!"

There have been some recent publications released about health care cost trends for 2008. One of those has been put out by PricewaterhouseCoopers' Health Research Institute and titled "Behind the Numbers." The report has some interesting statements that share what the charts, graphs, and statistics contained in it support according to the published information. One fact they have determined is that private sector health care costs are cyclical. Costs are influenced by utilization, price inflation of products and services, cost shifting and de-valuation of deductibles and co-pays. Insurance companies use this information to determine plan pricing for the next future year. One key factor in the material is that there will continue to be increases in both transparency and cost shifting to employees for insurance costs. Of course, we have seen these increases taking place over the past couple of years, and likely that will continue in the future.

Additional news from PricewaterhouseCoopers is that although growth in insurance premiums has been declining slowly over the past five years, costs are still going up for the employee. The average American this year will likely pay $13,704 for his employer sponsored health insurance to cover his family according to Towers Perrin. Their annual health care cost survey shows that companies with a rigorous, comprehensive style of managing employee health care have lower premiums than companies that do not monitor expenses and health care benefits. The more aggressive employers will manage employee participation, purchasing, and health risks on the job to bring down the costs associated with insurance and health care expenses.

With this type of approach, benefit designs that encourage employee accountability, price transparency, performance factors, communication and decision support, and other strategies that encourage a healthy lifestyle mindset and work environment will help keep cost increases to a minimum. Overall, Towers Perrin anticipates that employees will have to chip in 22% this year for their insurance coverage, in addition to out of pocket expenses. Employees in the U.S. will need to adjust how they perceive health care and expenses in order for them to receive the true value of what they are purchasing. Monitoring personal progress and maintaining healthy lifestyle habits will make a definite difference in how much is spent on health care needs.

Mercer reported late in 2007 that small companies may be forced to pay even more for health care in 2008, based on claims history, plan design, and size of the group. The increase for small employers may be even a 15% increase (with a range between 10% and 17% for companies who have under 50 employees) over last year in certain parts of the country. The national average is expected to be a 9% increase overall. Mercer also indicates that certain parts of the U.S. will have cost increases higher than others based upon population age, lifestyle, and plan design. Employees who are used to rich benefits are often more willing to pay more for them than to sacrifice benefits for cost. Rates will soften when employees are open to change plan designs and employers manage health care costs on a more aggressive basis.

A survey released by Hewitt in late 2007 indicates that some employers are continuing to shift a significant percentage of health care costs to employees. Often, this strategy will force those workers to elect not to seek preventive care and wait til the health care need is more critical. Although up front this will save money initially, the long term effect with this type of thinking will lead to ultimately higher health care expenses, decreased productivity at the workplace, and more unhealthy employees. Lost time due to preventable urgent care is less cost efficient. A healthy workforce is invaluable for the economy and the overall physical and mental health of Americans. Some options that Hewitt promotes to reduce health care costs are 1.) offering incentives to employees to use generic prescriptions when possible, 2.) establishing stricter vendor requirements and best practices, 3.) closer monitoring of costs and health risks, 4.) offering value based or new plans that promote savings, such as high deductible plans combined with an HSA.

So we know that it's going to cost more to stay healthy, and that we have a few more options this year than we have had in the past, and that we should expect to stay healthy if we make the effort to do so. All the studies and surveys each year indicate about the same type of information, but justify it with factual evidence gathered from a composite of health care data. What we can count on is that it's better than the alternative--no coverage, poor health, and death. Every American needs to be accountable for how they live and the choices they make, especially when health is on the line. If health care costs continue to spiral out of control, we have no one to blame but ourselves.

Until next time. Let me know what you think.