Jamie Moran is an employee-benefit specialist with Needham, Mass.-based Provider Insurance Group, an independent insurance agency with offices in Woonsocket and Belmont, Mass. Moran works with business clients out of the Woonsocket location. With health insurance costs a hot topic in the presidential election and with the local insurance landscape undergoing some changes, Moran answered five questions about it.
PBN: In September, Massachusetts-based Tufts Health Plan announced it will begin offering its preferred-provider organization product in Rhode Island, effective Jan. 1. What does Tuft’s arrival mean to employers?
MORAN: The obvious benefits of another health care carrier will be greater competition, the potential of cost savings for employers, and access the second-highest-rated health care provider in the nation. Some other benefits that are not so obvious will be the demand placed upon Blue Cross & Blue Shield of Rhode Island and UnitedHealthcare to raise their services levels to compete with Tufts nationally recognized status. The addition of a third major carrier gives a greater number of health plans for all Rhode Island employers to choose from and it gives larger employers the ability to have significantly more leverage in negotiating their health care benefit cost. A cautionary note to all employers would be that the addition of Tufts does not guarantee lower cost or that their entrance in the Rhode Island marketplace will lower the rising trend of inflation in healthcare premiums.
PBN: Are there any other companies that may follow Tufts’ lead?
MORAN: Due to some recent legislative changes that encouraged Tufts Healthcare to make the move back into the Rhode Island marketplace, it is conceivable that other health-insurance carriers may consider coming to Rhode Island. The most likely candidates would be from neighboring states like Massachusetts and Connecticut, where expanding their current reach would make good business and economic sense for the carrier. Many of those carriers will be keeping a close watch on Tufts’ success or failure over the next 18 months.
PBN: Why have health care costs – and likewise insurance premiums – been on a consistently rapid rise?
MORAN: One of the major factors causing the rapid inflation in health care cost is the aging of baby boomers. As a collective grouping, they have an increased utilization of medical services and prescription drugs. In addition, many baby boomers are moving off commercial health care plans offered through their employers and moving onto the government-sponsored Medicare plans. Medicare reimbursement rates paid to health care providers generally are significantly less than what that same provider receives through health insurance plans sponsored by employers. This causes providers to demand higher reimbursements from the commercial health care carriers to make up for the shortfall paid to them by Medicare patients.
There is a national shortage of qualified health care workers and organizations have to pay higher and higher amounts to attract and retain these workers. As labor cost increase, the demand by hospital organizations for higher reimbursement amounts from commercial health care carriers increases.
Another major factor relates to the technological advances in medicine that have come with a high research and development cost. Some of the latest technology designed to save lives and detect diseases at earlier stages is expensive in comparison to older technologies that may not have the same accuracy. If you ask most people “would you like to pay the same amount for health care you paid 10 years ago, however you can only use 10-year-old technology in your care” you will find most people would answer with a resounding “no.” Most people want the best opportunity to save their lives, regardless of the cost.
PBN: Health insurance costs and coverage has been a major issue in the presidential campaign. Can you outline in broad terms the plans of each candidate and your opinion of each?
MORAN: The Democrats are looking to distribute health care through the current employer-based distribution model where employers and employees both pay toward the cost of health insurance. For those people unable to get health insurance through their employer, they want people to be able to access a broad-based buying collaborative (the U.S. government) to get health care coverage. The Republicans are looking to tax health care benefits that employers supply to their employees and then give individuals a $2,500 tax credit and families a $5,000 tax credit to shop for their health care coverage from any place they choose. In this model, the hope is everyone has a choice of what type of health care plan they want and people have the opportunity to shop for the lowest cost available.
In very broad terms, both candidates are both in favor of our capitalist form of distribution of health care. Health care represents more than 16 percent of the nation’s gross domestic product. Unlike countries with socialized health care systems where the government controls and in most cases owns the health care system, the U.S. health care system is made up of thousands of small independent businesses owned by entrepreneurs that employ and run the country’s health care system. Neither candidate is looking to make a systemic change in the health care system that would fundamental change the current structure. Both candidates are focused on how to finance the purchase of health insurance and not focused on changing the health care system itself. Therefore, with no real systemic changes being proposed by either party, the current trend of rising health care cost will continue into the future.
PBN: What advice do you have for employers who need to budget for health insurance?
MORAN: For years employers dealt with health insurance separate and distinct from their other business cost. Because of the factors mentioned previously, the health care costs will continue to rise sharply, and employers will need to come to terms with this fact and face it head on. They need to plan long-term strategies on how they are going to manage the cost over the next five- and 10-year period. They need to factor this expense into their cost of business just like salaries, materials and marketing cost. If employers do not do this, they will be faced with some very unpleasant decisions they will need to make concerning the viability of offering health care to their employees. Without health care options available to employees, many organizations will lose their best employees and possibly place their business in jeopardy. It is important for business owners to meet with a professional that can help guide and develop these long-term strategies to ensure the health of the business and its employees.
