By Bill Rusteberg
Medical trend is driven by managed care contracts and has little to do with cost of health care and everything to do with the cost of health insurance.
Plan sponsors continue to hear the same message at every renewal – rising medical costs are due to an aging population, advanced technology, government mandates, Medicare cost shifting and other plausible but questionable representations from industry soothsayers. The message? Don’t fight it, accept it. It’s beyond your control.
Managed care contracts between health care givers and third party intermediaries contain provisions that guarantee continuous and systematic cost increases. Shared savings side agreements and other schemes found in the health industry economic chain help fuel out of control health insurance costs. The Weslaco ISD vs Aetna lawsuit exposes one example of how self-serving interests of third party intermediaries are made at the expense of clueless consumers who are paying for all of this.
Annual escalator clauses found in every managed care contract guarantees insurance rate increases whether deserved or not. An escalator clause is a guaranteed take-it-to-the-bank annual price increase that must be paid by someone, and I would wager you can guess who that is.
Medical trend has proven to be consistent and predictable and it’s not going away as long as you continue to subscribe to network plans.
The alternative is to move away from PPO plans as many of our clients have done over the past twenty years with good success. Medical trend is essentially eliminated producing static rates over long periods of time.
Critical thinking be damned as to why most plan sponsors continue to cling to a failed system of health care finance when there is a solution that’s been proven time and again for all the world to marvel at. You can lead a horse to water but you can’t make them drink.
Employers continue to cling to network plans so they can blame someone else.