Observations as of 3.31.2004
The renewals from the major providers issued in the 1st quarter and effective in
the 1st and 2nd quarters are indicating a softening of the medical markets.
In addition to a softening of the renewal rates we are observing a few providers
who are more competitive than the inforce provider (pre-negotiation phase).
This is all good news for the employers. After 5 or 6 years of mind
boggling renewals the premium payers are long over due some relief. It
should be noted that plans with high claim activity and or unfavorable
demographics will still face renewal problems similar to past years. Our
observation is a downward trend may have begun, but again we are not saying many
accounts won't have to work with renewals consistent with past years. We
will continue to follow the activity and report on it as the year unfolds.
Observations as of 12.31.2003 As the plan renewals for 2004
are just starting to appear there is no solid indicator of how local renewals will run
for the year, however, we expect to see a continuing of higher renewals.
They are projected to rise 12.5% this year. 2.5% more than 2003.
The Associated Press reports a
new Mercer survey citing renewals of 10.1% for 2003, this compares to 14.7% in
2002, and it comes as a surprise to some. This is still high and when
measured against inflation is running many times that rate, which is near zero.
The most likely reason the renewals were lower than anticipated is due to the
carving up of plans that took place in 2003. (See the table below).
It is noteworthy to point out the number of family plans that were dropped with
employers less than 500. Family plan termination counts for a larger
reduction in premium. This trend is only present with smaller (<500)
employers.
Healthcare cost per employee
for 2003 (the employer and employee annual contribution) is now $6,215 nationally. This compares to $3,594
per employee in 1997.
The federal Centers for
Medicare and Medicaid Services reports that cost for 2001 soared to 1.6
trillion or about $5,440 for every American. That's a 9.3% increase
over 2001, which is 47% more than Switzerland, the second most expensive
healthcare worldwide. Hospital and prescription cost are cited as the
main reason for the accelerated costs.
2003
saw employers shifting more of the cost to the employee side by way of benefit
adjustments and premium sharing
30% of the employers Mercer surveyed held their 2003 premium cost constant by
adjusting co pays, deductibles, and premium sharing. The cost shifting
process that has been occurring over the past several years is a losing
proposition and employers know it, it has the potential to lessen employee and
employer relations, not to mention the new wave of un-insured's that it could
produce
We solidly believe the only viable way to control long term cost is by
introducing disease management programs and good employee education via solid communication
formats. 39% of the employers surveyed are involved in programs to
better educate and assess their employees and the programs to help improve their
health. This trend is especially true in larger employers. We can
assist in this area by arranging custom programs.
Prescription drug cost rose 16.1% in 2003, 16.9% in 2002, 17.8% in 2001 and
18.3% in 2000. The slow down in drug cost is attributed to employers
adding additional tiers to the drug card co-pays, and a continuing trend by
employers to pursue generic drug use.
Locally we see renewals running from 10%
to 25%.
Memphis appears to be trending at
about 15% presently. We are working with employers to help define options
and alternatives. The cost of
health care has not caused any of our clients to make drastic benefit changes.
We are seeing a general shift where employers are sharing more of the increases
through premium contribution and/or increases in out-of-pocket
expenses.
Survey summary of key factors
Employee Contribution - as a percent of premium
2002
2003
PPO single rate
27%
27%
PPO family rate
53%
58%
HMO single rate
31%
35%
HMO family rate
50%
57%
Percent of employers with in-network PPO deductible of
$1,000 or greater
20%
34%
PPO in-network single maximum out-of-pocket (median)
$1,500
$2,000
HMO hospital deductible required
15%
50%
HMO office visit copay $20 or more
22%
33%
Rx cost increase
17%
16%
Smaller employer <500 data
PPO family contribution (employee)
n/r
$389
HMO family contribution (employee)
n/r
$359
Percent electing family coverage
51%
48%
Employers believing government intervention should occur
n/r
74%
Larger employer >500 data
PPO family contribution (employee)
n/r
$224
Percent electing family coverage
56%
56%
Deductibles over $1,000
n/r
4%
Employers offering a consumer directed health plan option
>20,000 employees
7%
9%
Employers believing government intervention should occur
n/r
63%
All employers
Employers who are involved with health care consumerism
programs
n/r
39%
Employers offering a consumer directed health plan option
