2013
It’s the claims stupid (and in this case a very liberal plan design)!
This employer gets it, very low deductibles are not good, but more important, they don’t blame an insurance company because they see what’s happening with claims. Interesting reading. Unfortunately, the answer is as it always is, the employee and retiree paying more are the source of the savings. Why did claims soar by 126%?
Crow Wing County authorized a number of health care plan changes in response to a 22 percent, or $800,000, increase in insurance rates for 2014.
“A 22 percent increase is just not sustainable for our organization,” said Tami Laska, human resources director.
Claims are driving the renewal increases, Laska said. The county’s health insurance benefit costs for employees and retirees is more than $5.8 million annually.
“In 2012, we exceeded our expected claims by 126 percent that means we overspent what we paid in by $845,000,” Laska said. “So we had a very high claims year.”
The next step was to look for options to reduce the premiums. Laska said they started by looking at the county’s most expensive plan — a $200 deductible for singles and a $400 deductible for families. But, she said, raising the deductible to $500 for a single and $1,000 for a family barely moved the needle. The cost changed by $66 per month, or 3 percent. Laska said they were looking at too large of a number to reduce to nibble at it. Even larger deductibles of $1,000 and $2,000 didn’t make enough of an impact. So she took the problem back to the benefits committee to come up with ways to erase an $800,000 cost increase for 2014.
QUINNSCOMMENTARY 
You indexed using CPI, I indexed using health care premium changes. At 8 percent, costs double every nine years or so – $200 becomes $400, then $800 then $1,600 with a few years to spare. $400, compounded is $3,000 or more
In fact, only 69 percent of total rewards is direct comp,where it was 72 percent of total rewards 30 years ago. Health coverage costs went from 5 percent of total rewards to 8 percent during the same period.
Clearly, the slices of the total rewards pie have changed.
See bls data
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O.k., I don’t “get it.” I read the article and the comments, and I understand what it is saying about moving people to medigap (if older) or HSAs (if younger), but that’s cost shifting, (like Obamacare). What is not explained is why did claims jump so much all at once?Was that a really poorly designed plan?
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I think the key words are “expected claims” We don’t know how realistic their expectations were or how they were developed. So you are right there is no explanation of why a great jump in one year. On the other hand, the plan design was something from the 1980s or before hardly encouraging concern for spending. My point was that at least they knew it was claims driving their costs.
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A $200/$400 deductible was part of my health plan 29 years ago – 1984. Keeping up with health care inflation, the deductible should be over $1,500/$3,000 today.
Simply, people have been insulated from health inflation – as bls/dol data show employers have diverted almost 3 percent more if rewards away from direct comp to spend on health coverage – over the same period.
It is why many hdhp options are NOT cost shift – and most times not even keeping up with costs.
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Actually Jack $400 in 1984 is a value of 900.30 in 2013 not near $3000. As I have mentioned previously, I disagree that employers would have been paying more in lieu of higher health care costs. That idea to me is an economists theoretical fantasy. In any case, today if the benefits are cut it is cost shifting because it cuts the workers disposable income.
When you find an employer that drops coverage or implements a HDHP and gives everyone a raise let me know. Heck, they have kept the savings from lower wages and then cut the future benefits that were paid for through those lower wages. You know; my favorite beef.
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General inflation though, not health care inflation.
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