Establishing and maintaining reserves is important for self-funded clients. Reserves are estimated based upon a number of factors. As medical trend increases claim costs, one must adjust reserve factors to compensate for the additional risk exposure.
A client is now in the process of estimating additional reserves needed for Plan Year 2015-2016. An email received today from one of the firm’s financial accountants read:
“FYI, the average monthly clams paid for FY15 was approximately $570,000 compared to approximately $490,000 for FY14 and $395,000 for FY13. “
What is interesting is claims are increasing on average 16-24% a year respectively, for an overall two year increase of 44%. Utilization has remained steady, with no high claims affecting paid claims to any significant degree.
If utilization remains constant, with no outlier claims to speak of, what is driving these increases?
In another study we performed for a client in Texas recently, over a three year period we documented hospital chargemaster rates increased by 27%.
Perhaps this is a clue?
Reversing medical trend is possible. Moving away from managed care contracts may provide the best recourse to combating ever increasing health care costs – Beating Medical Trend 2015