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Refreshing Insights

Updated June 30, 2021

The average insurance premium for family coverage has increased 22 percent over the last five years and 54 percent over the last ten years, according to a recent report by the Kaiser Family Foundation. 

A typical employer paid for approximately 70 percent of that premium, while employees covered the remaining costs, and the average annual deductible among covered workers has increased 36 percent over the last five years and 100 percent over the last ten years. 

What’s alarming is that some institutions project healthcare costs for large employers could rise another 6.5 percent in 2021, with even steeper increases expected for small and mid-sized organizations.

While many companies struggle to keep costs in check, others have found ways to mitigate the risks of rising healthcare costs. The difference comes with understanding the reasons that premiums keep going up in the first place and what can be done to address them. So...why do health insurance premiums keep going up?

Higher Prescription Drug and Specialty Medication Costs

The pharmacy and Rx arena has shifted dramatically in recent years. In 2018, American consumers spent $535 billion on prescription drugs, representing a 50 percent cost increase since 2010. For the average American, that translates to about $1,200 each year for prescription medications. Considering that approximately half of the population doesn’t take prescribed drugs, that number doubles for those who do.

For some with chronic or severe medical conditions such as rheumatoid arthritis, cancer or genetic diseases, however, costs for related specialty drugs can reach $50,000 or more per month. Deductibles and copays could be met with a single dose, leaving the insurance company to foot the remaining bill. 

Why prescription prices keep rising is up for debate. In the past, pharmaceutical companies attributed higher costs to innovation and research, but some studies suggests that these companies are raising prices on medications that are already available. This is supported by ongoing news reports about some insulin prices for diabetes patients that soared nearly 50 percent despite already being on the market for two decades.

What Employers Can Do

Many companies that offer health benefits to their employees can feel powerless over the impact of big pharma. However, employers can be proactive by analyzing their pharmacy benefits manager (PBM) contract.

PBM contracts change every six months, making it difficult for employers to keep tabs on prescription benefit costs. They can also be complex and sometimes lack transparency, adding to the confusion. It’s important, however, to dig deep into the details of your contract and evaluate your vendor to ensure your plan is structured properly. A qualified advisor who knows the inner workings of the PBM industry can often review your contract and may find ways to reduce agreed-upon drug prices.

The Average Cost Per Claim Keeps Going Up

A typical visit to a doctor’s office costs about $500. If you end up being admitted to the hospital, however, your inpatient costs will top $22,000 per stay. How does that compare to a few years ago? It’s more than double compared to 2010 when the average doctor visit cost less than $100 and a hospital stay cost just $9,700.

What Employers Can Do

Many employees simply aren’t aware of how to make the best decisions from a medical perspective or a cost perspective. Engaging employees and educating them about the important role they play in lowering costs and seeking out higher value providers can help. It’s not about going to a “budget” doctor; it’s about finding the right doctor to provide the right kind of care at the best price.

Just as someone might “shop around” for a major purchase, employees should also consider all their options when having a medical procedure. An MRI at a hospital, for example, can cost $2,500 or more, whereas that same procedure at an alternative facility may only cost $500. What makes shopping around difficult is that some medical providers lack transparency about the prices they charge for procedures, but with some digging and using price transparency tools, employees can find the best value and reduce their claims and out-of-pocket expenses.

Another practical way to reduce claims is reserving the use of the ER for true emergencies. If employees knew that an ER visit typically costs 5 times as much as going to Urgent Care or making an appointment with their primary physician, they’d likely think twice about taking their child to the ER for an ear infection or sore throat.

Alerting employees about the importance of reviewing doctor bills is another important step. Inaccurate charges for services received (or not received) can be included on medical bills and should be disputed.

The key to providing proper education is having tools, resources, and a focused and dedicated effort backed by a robust communication plan. Educated and informed employees are empowered employees.

The Number of Insurance Claims Keeps Rising

As the average age of our population and workforce rises, so too will the number of health insurance claims. Today, half of all Americans are over the age of 38 compared to the 1960s when the average age was just over 29. Americans are living longer, due in great part to advances in medical care, but with that care comes more medical claims.

A Pew Research report found that Americans ages 55 and older are working at much higher rates than in the past. Additionally, those in that older age category account for over half of total health spending.

Another factor playing a role is the rising number of claims associated with mental health care. Claims related to depression, anxiety, and other mental health conditions have risen by more than 100 percent in the past 10 years.

What Employers Can Do

While physical wellness programs have been popular for years, there’s a shift taking place to address the overall well-being of employees in organizations, including the physical, emotional and financial aspects of life.

There are many factors that can reduce visits to the doctor and the subsequent use of costly prescription drugs. A supportive working environment that minimizes stress, promotes healthy lifestyles, provides financial stability, and offers opportunities for improving life both at work and at home can improve a person’s well-being over time and reduce claims.

Know Your Options

A reputable and experienced benefits advisor can add incredible value to your organization by performing a thorough assessment of your workforce, claims history, current plan structure and other factors that may indicate opportunities for improvement. Your benefits advisor can also provide resources and tools to help educate your workforce and even meet with your group to help create awareness about reducing the number and severity of claims without compromising the level of care.

For even more insights and ideas to help you take control of rising healthcare costs, check out our complimentary guide below. 

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A collection of articles from the McClone team with the helpful knowledge and insights to ensure your organization is well protected.