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UltraLink - FOCUS...on benefits
June 2005
Milliman Medical Index Tracks Total Health Costs
Milliman, Inc. has released its first of what will be an annual "Medical Index" that quantifies the average total yearly medical costs for a typical family of four. The index is unique in that it looks beyond employer health costs to also include the costs that employees and their dependents pay out-of-pocket. Given the shifting of costs to employees in the current environment, Milliman points out that looking just at employer costs can increasingly obscure real trends in health care spending. The Index estimates absolute dollar values of health service utilization, as well as trends, by component of care and details consumer spending as a portion of the total.
For 2005, the average medical cost for a family of four was $12,214, with employees paying $2,035, or 6% of the total, out-of-pocket. The percentage increase in total costs from 2004 to 2005 was 9.1%, compared to increases of 10.1% in each of the previous two years. Dollar amounts, the percent of total costs and trends by component of care include:
| | Total $ | % of Total | Trend 2004-2005 |
| Physician Services | $4,527 | 37% | 8.10% |
| Inpatient Hospital | $3,704 | 30% | 8.00% |
| Outpatient Hospital | $1,858 | 15% | 9.50% |
| Pharmacy | $1,785 | 15% | 12.80% |
| Other | $339 | 3% | 13.80% |
| TOTAL | $12,213 | 100% | 9.10% |
Despite considerable concern about pharmacy trends over the past several years, the Index points out that, in terms of actual dollars, increases in inpatient/outpatient hospital services account for $430 of the increase in cost from 2004 to 2005, while pharmacy contributes $203. Another unexpected finding is that, although employers have been shifting costs to employees, the percentage of costs paid by employees has actually decreased since 2003; that is, employers have increased employee cost-sharing less than overall costs have increased.
To view the Milliman Medical Index Report, go to www.milliman.com
Source: Milliman, Inc.
Consumer Education and Support Standards Issued
by URAC
URAC, the accrediting organization, has issued the first guidelines on the consumer decision support so critical to consumer-directed health plans (CDHP). URAC will accredit organizations based on these "Consumer Education and Support" (CES) standards, and anticipates expanding the accreditation process for CDHPs as more experience is gained with the plans.
The standards identify features that consumers and purchasers should consider when choosing a CDHP. They suggest that CDHPs should:
. Ensure that consumer information is available and
understandable to all members, i.e., that it is available
in different formats, media and languages
. Clearly explain, prior to enrollment, all costs to the
member of participating in the plan; the benefits,
coverage guidelines, satisfaction ratings, provider
directories and decision support tools available; and the
members responsibilities for making health decisions
. Proactively provide to all members wellness &
prevention information; access to a Health Risk
Appraisal with feedback on risks and suggestions for
improvement; and, for those with chronic illnesses,
self-management education and support
. Proactively provide instructions on how to get
assistance via email, telephone or in-person and
provide 24-hour telephone assistance
. Provide available cost and quality information for
choosing providers, and support for effective financial
decisions
To view the full report on the standards, Issue Brief: URAC's Consumer Education and Support Standards, go to http://www.urac.org/documents/URACIssueBriefCES1.pdf
Source: URAC News Release, June 6, 2005.
Voluntary Supplemental Plans Help Employees Manage Health Costs
As employees take on greater responsibility for health costs, more employers are offering voluntary plans to supplement core health benefits. With more than half of the bankruptcy filings in 2001 due to medical expenses - and the recent implementation of stricter bankruptcy laws - such plans are expected to become more widespread.
The plans can be specific to hospital expenses or to injury, cancer or other critical and costly illnesses. The voluntary supplemental plans can help employees pay for costs not covered by their core health plans, such as co-insurance, out-of-network care, experimental treatments, out-of-town travel and child care.
Source: BenefitNews.com Industry Currents, May 2, 2005
2006 HMO Rates
Preliminary data from Hewitt Associates suggests that 2006 HMO rate increases for commercial, fully insured HMOs will be somewhat lower than last year, but still substantially above overall inflation. HMOs are seeking rate hikes of 12.4% nationally this year, compared to 13.7% at the same time last year. After negotiations and final contracting the 2005 increase was 9%.
Employers continue to modify plan designs and increase employee cost-sharing to try to rein in costs. The percentage of companies offering $20 copays for office visits increased from 16% in 2004 to 25% in 2005, while the percent offering $10 copays decreased from 29% to 22% over the same period.
Increases are projected to be greatest in the Northeast, where increases of 15.8% are currently being proposed, and least in the Southeast and West, where increases are 9.4% and 10.9%, respectively, at this point. The Hewitt survey is based on 160 companies representing more than 1 million employees.
Source: The Wall Street Journal, June 10, 2005; Hewitt Associates Press Release, June 9, 2005: HMOs Propose Lowest Rate Increases in Five Years.
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