Medical Trend

By Bill Rusteberg

Medical trend (inflation) is largely due to inflated medical costs guaranteed to increase year after year in managed care contracts through annual escalator clauses (Escalator Clauses, Rising Prices, And Why We Should Care). In addition, renegotiated contracts effectively cause a double whammy (renegotiated provider contracts always end up costing more, not less).

Medical costs have remained relatively stable over the past five years but medical “costs” to the payer of services have increased 9-10% each year. Think about that – Medical costs have remained static but medical costs have increased. Try to explain that to Uncle Hermann.

Groups eschewing managed care historically beat medical trend (Beating Medical Trend – Managed Care vs Reference Based Pricing).

On the other hand, the BUCA’s continue to rely upon managed care contracts that drive costs up, not down. Why ? Frequent readers of this blog know the answer.

Today I reviewed a BUCA renewal. In 2017 their trend factor was 10.56%. Their trend factor for 2018 is projected to be 11.04%. The group is getting a whopping increase, much larger than trend, despite a 68% loss ratio. The multiplier effect of trend is costing the plan sponsor dearly.

I like a trend factor of 0%. Don’t you? In fact, how about a negative trend factor? It exists.

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.

The shared vision of RiskManagers.us and clients who retain our services is to establish and maintain a comprehensive employee health and welfare plan, identify cost areas that may be improved without cost shifting to any significant degree, and ensure a superior and sustained partnership with a claim administrator responsive to members needs on a level consistent with prudent business practices.

Plan costs, in all areas including fixed expenses and claims are open for review on a continuing basis. Cost effective plan administration and equitable benefit payment to providers are paramount to fulfilling our mutual fiduciary duties. As we proactively monitor and manage an entire benefit program we are open to any suggestions members may make or the dynamic health benefit market may warrant in order to accomplish these goals.

Duty of loyalty to our clients, transparency and accountability are essential to the foundation of our services. To that end, we expect our clients to realize a substantial savings based upon the services that we will deliver.

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