Ever since the onset of the Affordable Care Act (ACA), health insurance premiums have been increasing at a significant rate year after year. The ACA was intended to save Americans billions of dollars in premiums by capping health insurers’ profit margins and holding them accountable.
Unfortunately, the ACA was not effective in reducing insurance premiums for Americans because of the lack of regulations that would monitor the validity of costs that are being paid toward claims. The regulations that the ACA had on insurers only restricted their profit margin, which led to insurance companies increasing their revenue through insurance premiums and costs through insurance claim costs.
Affordable Care Act 80/20 Rule
The 80/20 Rule requires insurers to spend at least 80 percent of the insurance premiums that they collect from policyholders on medical insurance claims and quality improvement costs. This leaves the remaining 20 percent for things such as administrative overhead and marketing efforts.
If insurers were unable to fulfill the 80 percent insurance claim spend requirement, policy holders would get a rebate of the difference. This rule was put into effect to save Americans money on their annual medical insurance spend while capping the profit margin that insurance companies can have.
In the first year of effect, the 80/20 Rule brought back billions of dollars to Americans in insurance rebates because insurance companies struggled to comply with the new rule. Soon after, insurers started to allow an increase to the cost of medical insurance claims to maximize medical insurance claim costs and minimize the rebates that policyholders should have been receiving.
Varying Medical Insurance Claim Costs
The cost that health facilities charge an individual varies on the carrier and type of coverage that they have. For example, an individual with no insurance can be charged $200 in cash to have a given procedure performed, an individual with insurance will be charged up to $2,000 for the same procedure and same physician simply because they have insurance.
The average hospital has more than 125 prices that they invoice for a given procedure depending on the insurance that the individual has. This variance in price is significant because procedures in retail market plans can have a difference of tens of thousands of dollars depending on the contract of the plan, which is a loophole insurance companies are using to satisfy the 80/20 Rule and not having to pay rebates to policyholders.
Medical procedures vary significantly both across and within geographic regions. For example, in the study “KFF analysis of IBM MarketScan Commercial Claims and Encounters Database” showed that the average allowed charges for in network knee and hip joint replacement surgery in large employer plans had an interquartile range* of $31,690 with a median of $33,554 in the San Diego-Carlsbad, CA region.
On the other hand, the Baltimore-Columbia-Towson, MD region had an interquartile range of $6,198 and a median of $23,170 for the same procedure. This shows how significant the medical claim costs vary within and across regions throughout the nation. Ever since the onset of the ACA, medical claim costs have had absurd variances adopted by health centers across the country to offset the Affordable Care Act’s attempt to reduce policyholders’ premiums in the 80/20 Rule.
How Can Employers Fight Back Rising Insurance Premiums?
The constant increase of insurance premiums are forcing businesses to reduce contributions, decrease benefits, or cancel health plans altogether. The rising insurance premiums are causing employers to turn to customized health plan solutions that increase insurance premium savings and maintain quality benefits.
This alternative plan solution allows the business to control the selection of the plan that fits the employees’ needs. By effectively using a custom health plan design, employers can save a significant amount year after year on insurance spend without the need to reduce benefits or employer contribution.
Contact New City Insurance Today
Group Health Insurance premiums are increasing year after year causing employers to reduce coverage for employees and increase annual insurance spend. New City Insurance can implement a customized health plan solution that will maximize insurance savings while increasing benefits that meet the employees’ needs. Call New City Insurance today, or visit us online to learn more.