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This publication examines in-depth subjects related to employee benefit plans.
Archived Benefit Advisors
Issued quarterly, this publication examines in-depth subjects related to employee benefit plans.
Quick bulletins to keep you abreast of the most recent legislative activities that may affect your organization and benefit plans, Special Alerts are released on an “as needed” basis.
Given the complexity and magnitude of the health care reform legislation, we address key issues independently through these timely Updates.
Archived Reform Updates
Our technical bulletins are written and produced by Marsh & McLennan Agency | Michigan staff and are intended to inform our clients and friends on general information relating to employee benefit plans. They are based on general information at the time they are prepared. They are not intended to provide either legal or tax advice. Before implementing any welfare or pension benefit program, employers are urged to consult with their benefits advisor and/or legal counsel for advice that is appropriate to their specific circumstances. This information cannot be used by any taxpayer to avoid tax penalties.
Health Care Central
Trend is the average forecasted change in health plans’ per capita claims cost determined by insurance carriers, managed care organizations and third party administrators. Many factors are taken into account when determining trend.
Although there is usually a high correlation between trend and plan sponsors’ actual cost increases, trend and net change in year-to-year plan costs are not the same. Changes in the costs to plan sponsors can be significantly different from projected claims cost trends, reflecting such diverse factors as plan design changes, employee contribution rate increases, group demographics, carrier retention, margins, stop-loss coverage and artificial rate relief from the effects of competitive bidding.
McGraw Wentworth closely monitors trends related to health care. We analyze industry trends to keep our clients informed on how their expected costs may increase year over year. This valuable information guides our clients in making their decisions on managing budgets and offering competitive employee benefit plans.
for more information on the factors that influence trends
for the latest quarter trends in the health care industry
Factors that Influence Trends
Trend is the average forecasted change in health plans’ per capita claims cost. This figure is determined by insurance carriers, Managed Care Organizations, Pharmacy Benefit Managers, and Third Party Administrators. Trend projections are usually updated each quarter within a year and vary by source depending on the specific characteristics of the population being analyzed.
Trend comprises the following components:
- Price Inflation – this represents the per unit increase in the price of items such as medical supplies, drug unit costs and medical treatments.Increased Utilization – this represents the frequency of consumption of items such as medical services, medical supplies, prescription drugs, etc. Utilization increases due to factors such as:
- Increased need for services by the aging population
- Increased consumer awareness of new medical technology and drug treatments
- Upgraded diagnostic and detection methods related to preventive services
- Technological Advances – this represents the introduction of new medical equipment, new medical and drug therapies, and the recent introduction of technological requirements needed to comply with HIPAA.
- Deductible Leveraging – this represents the change in cost sharing from the employee to the health care plan due to price inflation within a fixed co-pay arrangement.
EXAMPLE A health plan participant pays a flat $20 co-pay for a 34 day dose of a prescription drug costing $100. If the drug price increases to $125 in the following year and the participant’s co-pay remains $20, the health plan’s liability increases from $80 to $105. This scenario represents a 31% increase in exposure for the health plan.
- Cost Shifting – this represents the shifting of costs from the public sector to the private sector. This occurs when the federal government reduces Medicare reimbursement rates or when hospitals experience an increase in the level of uninsured patients. Providers increase their fees to the private sector to recoup the deficit from other revenue sources.
- Government Mandated Benefits and Legislative Changes – this represents the costs associated with compliance with items such as HIPAA, Medicare D and various state-mandated benefits.
Latest Quarter Trends
These charts illustrate recent trend estimates by line of coverage provided by several large commercial insurance carriers. The carriers provided both National and Michigan trend estimates. These estimates vary among the sources depending on several variables such as the demographics of a carrier’s book of business, degree of cost control measures, plan exclusions / limitations, etc. These trend estimates can be used as a tool to forecast a company’s future claim costs in a self-funded environment.
Carrier Medical Trend Survey for 2nd Quarter 2015
Carrier Prescription Drug Trend Survey for 2nd Quarter 2015
Carrier Dental Trend Survey for 2nd Quarter 2015