Last week The Wall Street Journal published a full-page article entitled “Why Americans Spend So Much On Health Care – In 12 Charts” …kind of summarizes my blog over the past year. Tax and employer subsidies mask the real cost of healthcare with little incentive to “shop” for efficient care. Providers are opaque with their pricing while their consolidation creates better bargaining leverage and stronger entrenchment in the system.
In the meantime, as compared with other developed countries, Americans have lower life expectancies, higher infant mortality and a significantly higher death rate from obesity; yet comparable death rates from cancer, respiratory and heart disease. The New York Business Group on Health reported that in the United States average costs per employee are expected to increase to $14,800 in 2019, up 5% – and employers on average will pay 70% of this.
Self-insured employers are the most nimble in battling rising costs. A number of employers are changing to contracting arrangements with narrow networks, and risk-based provider contracts and direct contracting have become common among large employers. Larger employers are aggressively deconstructing costs to get leverage on pharmacy, stop loss premiums and disease-specific charges.
In 2019, small employers will see some relief as (despite projections to the contrary) small rate increases and even some decreases are being seen on initial rate filings. And I am curious to see how Association Health Plans will impact participation as many states like New York are simply disallowing these purchasing pools.
Health insurance consulting used to be an easy business. Reflecting on costs approaching 20% of our gross domestic product, it is no longer easy, and the quality of your adviser is critical in staying ahead of the trends.