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Is it Healthcare or Health Insurance? No wonder everyone is confused!

Prepared by Pacific Benefit Planners

We read and hear about how America is confused about healthcare. It’s not healthcare America is confused about, it’s health insurance. A local healthcare insurance company describes their insurance plans to brokers as follows:

“As an employer, you are looking for quality health care at a good value for your employees. XYZ health Plan has several plan options from which to choose. Please contact your health insurance agent, or our Sales Team to find out what options are available to you.”

Are they selling health insurance or healthcare? Is there any wonder that the public and politicians are confused? In today’s competitive work environment,employees feel they are entitled to a wide range of company-provided fringe benefits. These typically include basic and major medical protection, dental and group life insurance. The current trend in employee benefits is to increase the number and types of benefits available and to encourage employees to tailor benefits packages to their individual situations and needs.

While employees expect the best in health care, costs are exceeding the ability of employers, providers, and health plans to buffer consumers from feeling an impact from these rising costs. Surges in costs for both prescription drugs and new technologies are occurring at the same time that physicians are pushing for improvements in compensation to help offset soaring malpractice insurance costs. Managed care is facing increasing scrutiny and change from regulatory and legislative actions.

The Technological and Pharmaceutical Environment

The explosive growth of new technology is introducing new, more effective treatments and diagnostic tools to the medical world –accompanied by an explosion in costs. Pharmaceuticals, in particular, are seeing tremendous growth in new development, costs and utilization. Physicians cannot control the prices charged by the manufacturers of these products, nor can they control the justifiable increase in demand for new products that improve care. But somebody has to pay for them.

The Consumer Environment

As the baby boom generation reaches midlife, our population is seeing a demographic shift to older people who require more health care services. Fortunately for them, technological and pharmaceutical advancements are helping to extend the length and quality of life – but at a cost.

Patients and members are becoming highly informed healthcare  “consumers.” Information technology is exploding as rapidly as medical technology, and people are using their computers to learn about their healthcare choices. Also, they are hearing about new, expensive medications every time they turn on the television set. Drug advertising is at an all-time high, and, consequently, so is demand. Rising consumer demand is a significant contributor to the increasing utilization of costly services and medications.

The Provider Environment

Hospital costs are going up. From 1996 to 2000, ambulatory surgery costs increased 43 percent. Physicians have seen their costs rise and reimbursement for services fall, particularly in recent years as HMOs have negotiated tighter contracts to keep premiums low. Low reimbursement and rising costs results in an exodus of physicians. To keep sufficient numbers o fphysicians in practice, an adjustment in income is overdue and on its way.

The Regulatory Environment

A rash of sensationalized media stories has fed public mistrust of HMOs in recent years, resulting in widespread public demand for patient rights legislation. The result is a rising number of new requirements for health plans – all of which cost money to implement and follow.

All of these cost drivers have resulted in significant insurance losses on medical underwriting in recent years. Costs keep rising,and premiums keep rising to cover costs. Some new strategies are in order for meeting the challenges of these changing times. Many of today’s largest healthcare cost drivers – such as new drugs and technologies and new regulatory requirements – fall outside the health plan provider’s control. Health plans and members will need to work together to manage these costs.

As people become more informed about the medical choices available to them, they need to become more informed about and involved in the financial consequences of their choices. Increasingly benefit plans promote greater member cost-sharing as a rational approach to support a consumer-driven health care economy.

Studies show that when consumers have better access to information, they tend to choose less expensive, more conservative therapies.Health plan providers give members free access to online health library and information about prescription drugs, including their prices and medical benefits.

To offer employers and members a range of premiums to fit a range of budgets, health plan providers are designing a wide range of new cost-sharing plans. Lower premiums are available in exchange for a higher degree of cost sharing – via deductibles and coinsurance – on the part of the member. Whether or not employees contribute to the cost of their group benefits varies from employer to employer. Generally, however, most group insurance plans begin with a modest package of affordable benefits. As employees ask for additional benefits that meet their individual situations and needs, they may be asked to assume more of the overall cost for their benefits.

Health insurance premiums finance almost $2,000,000,000,000-that’s right, $2 trillion in healthcare services in America. It’s those services everyone is really talking about and who’s responsible for that bill and the premiums to pay for the insurance.

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