You may have heard the word s health care trend rate, so what is that? It is the cost of health care claims over a period of time. Claim costs are a combination of the cost of services and the utilization of those services. Let’s say that the price of an average office visit goes from $65.00 to $70.00 that is an increase of 7.6%. However, further assume that the number of office visits went from 100 to 125 so that is a 25% increase.
So, in one year we had 100 office visits at $65.00 for a cost of $6,500 and in the next we had 125 office visits at $70.00 or $8750.00. In other words, health care costs for this population jumped 34.6%.
There are many factors that affect trend in a group such as a change in the benefit payments, the demographics, even location, but make no mistake about it, what is spent on claims for health care is what drives your premiums and even if the medical inflation is modest (the change in the cost of a given service), utilization can drive trend skyward. In many ways the cost of your premiums or payroll deductions is in your hands. This is especially true if you are enrolled in an employer self-insured group.
Health care trends for 2011, a report from Segal
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