Johnson McCann - Group Benefits Administrator

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Trends in Group Medical Insurance
A desire to reduce increasing health care claims and costs is the impetus driving key trends in group medical insurance.

"These key trends include an increase in high deductible health care plans, greater transparency in health care costs, an increase in corporate wellness initiatives, and use of more generic and over-the-counter medications," according to Gayle McCann, president, Johnson McCann.

Access, affordability of coverage
Access and affordability of coverage are intertwined. Rising health care costs create pressure on the budgets of employers and the public sector in a variety of ways. For example, increases in the cost of health insurance reduces the affordability of coverage, according to an October 2007 Issue Brief by the Health Economics Program of the Minnesota Department of Health (MDH).

"It's no surprise that health care spending is on the rise. Claim costs also continue to increase, which causes premiums to rise," explains McCann. "Employers need to educate and involve employees in the process to increase their awareness of how the system works and what the costs are. This in turn, will help to reduce claim costs."

Numbers of uninsured stabilizes in Minnesota
Despite all of the rhetoric about increasing numbers of uninsured individuals, the numbers have stabilized in Minnesota. After rising between 2001 and 2004, the percentage of Minnesotans without health insurance was stable between 2004 and 2007, according to the results of a new 2007 survey by the Minnesota Department of Health (MDH) and the University of Minnesota School of Public Health.

Methods to reduce claims
The industry is working to reduce claims by:

Moving to high-deductible health plans, coupled with health reimbursement arrangements or health savings accounts.
Decreasing utilization or frequency of claims by increasing co-pays, deductibles, and coinsurance levels.
Communicating with employees to help them understand why premiums increase.
Increasing the usage of generic and over-the-counter medications
Promoting prevention and healthy lifestyles through wellness initiatives.

Wellness initiatives lower costs
"In particular, we're seeing more small to midsize employers becoming increasingly active in employee wellness initiatives," she says. "Companies that focus on managing the health of their covered employees through targeted, clinically-based care management programs have an average of 18.2 percent lower health care costs."

Costs rising in many countries
The United States isn't the only country, however, that is experiencing rising health care costs. According to researchers at Watson Wyatt Worldwide, a global consulting firm focused on human capital and financial management in Washington, health care costs are rising rapidly around the globe - even in countries that offer national health plans or other government-run health plans.

Trends in premiums
While growth in private health insurance premiums and underlying spending has moderated somewhat in Minnesota, spending growth over the past few years is still in the range of seven to nine percent per person, per year, according to the MDH. The Health Economics Program conducts an annual analysis of trends in premiums and cost drivers in Minnesota's private health insurance market. Key findings in 2006 include the following:

Health care spending growth increased from 2004 to 2006 in several areas:

Physician services accounted for 43 percent of spending growth.
Inpatient and outpatient services accounted for 45 percent of growth.
Health plan administration spending was flat.
Prescription drug spending per person declined slightly.

After slowing to 4.5 percent growth in 2005, private health insurance premiums grew by 7.6 percent per person in 2006.
Growth in health plans' spending per enrollee also increased between 2005 and 2006, from 7.2 percent per enrollee to 8.9 percent per enrollee.
Private health insurance premiums and health plan expenses per enrollee were roughly equal in 2006 at $3,460 and $3,440 per person respectively.
Enrollee out-of-pocket costs such as deductibles and co-payments accounted for an additional $562 per person in 2006, a 15-percent increase over 2005.
Although the gap between growth in health care costs and other key economic indicators has narrowed over the past few years, growth in health care costs per person that are paid for by private insurance is still two to three times higher than growth in per capita income and wages, and over 5.5 times higher than inflation.

Communication key to success
Communication is one of the keys that unlock the door to success when it comes to reducing health care costs and claims.

"The vast majority of employees don't see the relationship between costs and claims," says McCann. "That's why it's important to communicate regularly and create awareness among employees of cost breakdowns and trends. They also need to understand that they will benefit financially if cost-containment efforts are effective."