1999 Medical Inflation Trend?

[Guest pmadden]

Can you share your rate increase for 1999? Our POS Plan (self insured) for 865 members and 1500 lives is increasing for 1999 at 9.67%. Want to know if others have similar increases. Thank you.

[Guest jreddi]

We are a 600 person law firm (485 enrolled in plan) with a PPO and DPP plan. We experienced a 4.8% increase across the board. It was a tough negotiation, but we were able to hold the ins co down from an 11% increase.

[Guest nac]

self funded ppo: 16%

hmo's (fully insured, 22 total): 5% aggregate

[Larry M]

Beware of anecdotal increases as a basis for your own plan.

Our clients have received increases which vary by type of plan, location and experience of the group. The range of rate changes is quite wide, including a rare decrease in requested renewal rate.

[As an aside, our insurance company and hmo clients have been requesting rate changes which vary by those factors.]

For community rated plans, the spread of rate changes is not as great.

Also affecting rate increases is the effect of prior years' competitive stances taken by some carriers in order to buy business. Most of them are now trying to regain some margin of profit after having had loss leader rates.

[Guest LydiaLerner]

Two accounts received no increase, most 5-8%.

With Kaiser news hitting the street,carriers that may have done a better job budgeting and who resisted the temptation to follow the herd and buy market share are being rewarded. Expect carriers to follow suit and have larger increases in 1999 to take advantage of the window of opportunity provided by Kaiser. Huge % increases for HMOs resulted from poor underwriting by carrier and Plans being underfunded. Also, medicare risk reimbursement decreases need to be made up somewhere. For the large group (over 50) market, if the carrier can get away with it, they will do it! Have your broker negotiate & ask for justification.

[Guest jamesfdavis]

I notice that your POS plan is self-funded, so insurance company rate increases shouldn't really matter.

Your question implies that a third party (a carrier or consultant) recommeded your new pseudorates, but it's really up to you whether you follow the recommendation. You should review the internal components of the rate projection to test its reasonableness. Some of the key elements are:

Current Claims Experience. Is it better or worse than expected when you set your 1998 rates?

Trend. Your consultant or broker should have a sense of what is a reasonable range of assumptions. You need to decide whether you want to be optimistic or cautious in the assumption you use. Variables that can affect your trend assumption are:

- Your plan design

- In- versus out-of-network utilization

- Capitated versus fee-for-service provider reimbursement

- Your workforce's geographic distribution

- Your administrator's ability to control claims

- Your network's plans to change provider reimbursement.

Your plan is too small to rely on its own past trend to project future trend.

Fluctuation Margin. If you're optimistic, you can dispense with it altogether.

IBNR Change. Do you need it in your pseudorates at all? Not all self-funded plans recognize IBNR in their rates. Some recognize it only as a liability on the company's balance sheet; others fund it with lump-sum deposits in a VEBA; and still others don't recognize it at all.

Administrative and network fees. Price should not be much of an object, if your administrator is successful at managing benefit costs.

Stop Loss Premium. Are your carrier's rates competitive? However, be very careful about opening gaps in coverage, if you change carriers.

Finally, there can be disadvantages to low pseudorates:

- Your CFO can freak out, if experence goes south and your pseudopremium (implicitly, your budget) does not cover plan expenses

- Lower pseudorates mean lower COBRA rates, and most employers don't like to encourage COBRA participation.

[Guest EMK]

For a self-insured medical plan for the year 2000, what is the appropriate IBNR to use? One month, two months, three months of claims expense? Claims administrator is a large national carrier. I understand with electronic filing expansion and with virtual simultaneous adjudication of pharmacy claims that IBNRs had headed down. Any information would be greatly appreciated.

[Guest EMK]

Assume IBNR (incurred but not reported, aka claims runout, or claims lag) for self-insured national PPO employer-sponsored plan administered by a large national carrier.

I'm less interested in whether the IBNR claims "reserve" is actually reserved in a VEBA trust or in a separate reserve account or is unfunded but listed as a liability on the publicly-traded company books (UNLESS the way it is accounted for makes a difference in the amount of IBNR).

Obviously, a publicly-traded company's outside accountants have to feel comfortable that the amount of reserve or liability for this purpose is adequate. Perhaps that is why I am having trouble finding out what happens at other large companys, since it is beginning to appear that it's really an accounting function rather than benefits driving the IBNR determination.

My own experience with/exposure to hospital claims in recent years has been very mixed. Either the claims are adjudicated quickly or there is a long lag. Unfortunately the longest lag I have seen was with my own claim - I got a balance bill about 16 months after the service. I attribute the lag to the inability of this public, tertiary care hospital's inability to deal with a patient with primary and secondary prive group insurance.

[KIP KRAUS]

EMK:

I assume you people are talking about Claim reserves when you use the acronym IBNR? If so, you need to undestand that claim runout(for which you reserve)depends on the medical plan design,i.e. it takes longer for comprehensive claims to mature than for base plan claims without deductibles. I have also seen major claims lag with hospitals. I'm not sure why this happens, but my experience over the years with hospitals is that they have terrible accounting procedures thus terrible billing procedures. I have seen hospital bills take as long as 3 to 4 months to hit the claims administrator's desk.

[KIP KRAUS]

here is a decent site for insurance info.

http://www.insure.com/health/

[Guest ScottN]

IBNR is the acronym for Incurred But Not Reported. It would be the claims lag at a given point in time.

I agree with the statement regarding hospital claims administration. We were trying to get a quick pay discount from a hospital for dates of service in mid-July. The hospital billing department told us the billing would not be generated by the computer until the end of August.

[Larry M]

EMK, I assume by your question you are trying to determine the claim costs for this year in order to estimate next year's claim costs.

For every plan there is a unique IBNR (sounds as if this would make a nice beginning to a song).

For your plan, it should be relatively easy to get information from the company providing the claims service. Ask it to give to you a listing which shows for calendar years 1997 and 1998 separately, all claims which were incurred in the year and which were reported one, two, three, four, five and six or more months after the year.

From this, you will get an idea as to what percwntage of the year's claims are outstanding after each period.

Assuming no material changes in claims handling or in plan design or in makeup of the covered group, you can assume the lag will be about the same for your current claims.

You can estimate the claims incurred within the period - Paid claims minus previous year's reserve plus this year's reserve.

Once this is done, the next job is to try to estimate what next year's claims will be.

It's relatively simple in some respects

Just remember, your estimate will never be correct. You just hope it will be within 2% of what will actually happen.

[Guest jfgc]

I would like to see what the average TPA administrative fee is broken down by health plan administration and COBRA and HIPAA administration. I have a company with approximately 800 employees in several states with PPO networks. The TPA primarily processes claims and administers the COBRA program. I keep seeing admin fees all across the board. What is a reasonable fee?