This section offers information that we hope will give you a better understanding of some of the things that can add to the cost of your health coverage, generally referred to as “cost drivers.”
In addition, please click here to access Kaiser's "Health Care Costs Primer: Key Information on Health Care Costs and Their Impact".
Health Plan Cost Drivers
Increases in your health plan premiums are “driven” by many outside influences. To help you understand these drivers, we have listed some of them below.
- General inflation
- Increased utilization of services due to increased consumer demand, new medical treatments, more intensive diagnostic testing (due somewhat to the practice of defensive medicine), an aging population and increasingly unhealthy lifestyles
- Price increases due to provider consolidations, increased costs of labor and higher priced technologies
- Government mandated premium increases in the form of mandated offerings
- Government mandated contract terms between private entities
It is these last two cost drivers that we personally can do something about - by asking our state policymakers to stop proposing legislation that would interfere in private contracts.
What is a “government mandated premium increase”?
This is an increase in your health plan premium, and if you have health coverage through your employer, an increase in your employer’s health plan premium, due to the government’s desire to mandate that certain items be included in your contract. This eliminates any negotiation between your employer and the health plan, forcing the item to be included, as well as, the costs associated with the item. These items are also sometimes referred to as “mandates.” Our state Legislature has mandated many items in past years – including forcing coverage for those who have been arrested to covering hairpieces. In fact, purchasers of health coverage in Oklahoma are currently required to pay for more than 20 mandates.
In addition, each of these mandates adds to your overall premium. How? Because the health plan must include the item in any product it sells to you and you are forced to pay for it.
Another important component to consider is your employer’s ability to offer an “attractive” benefit package to employees. If the government mandates benefit packages, it makes it impossible for employers to be creative and use their benefit packages to appeal to their employees. For example, one local employer found a way to attract many new employees to his firm by offering fertility coverage. By having flexibility to choose that as a benefit, he has successfully hired several new employees and pleased many current employees by offering fertility coverage.
This negotiation allows you and your employer or health plan to put together a benefit package that is tailored to your needs. When this is allowed to happen in the market place consumers and employers are able to look at costs versus coverage and make the right decisions for their families and employees, rather than having only a “one package that fits all” approach.
A simple example: Think of this as the government mandating that every time you go to the grocery store you are mandated to buy a rack of lamb – even if you don’t want or need it. The government has decided, perhaps based on the recommendation of those selling lamb, that every Oklahoman should have a rack of lamb. Even if you don’t use the rack of lamb, you had to buy it and it has added to your overall grocery bill.
More relative to health coverage, you will see mandates proposed as technology becomes available – sometimes, before the technology is even proven effective. As an example, if a new lab test were discovered and the researchers said the lab test could detect a certain disease, those researchers may push for a mandate to pay for their tests – so they are guaranteed payment by the health plan. This mandate drives up the cost of your health care because now you have to pay for the test, as it must be added to your contract, before mandating that we include that lab test in your contract and before we pay for that lab test, we should stop, evaluate the test and be certain it is effective and not just an experimental treatment.
This is advantageous to you. Why? Because as a member of a health plan you have the luxury of knowing that your health plan has done the research for you. The health plan’s medical directors have already poured over the medical journals and the studies to ensure that they are including as a benefit those procedures, tests and drugs that are proven effective. You don’t have to worry whether or not the lab test you undergo is effective – it will be if your health plan covers it. You wouldn’t buy a car and expect to do the crash-test ratings yourself – and you don’t expect that from your health plan either.
Suggestions:
- Every mandate should be evaluated by an independent advisory commission to proactively evaluate the mandate’s impact based on accurate and unbiased data to ensure that it will result in improved care and value.
- Every mandate should promote evidence-based medicine to ensure that quality is paramount and that the additional cost imposed by the mandate adds value.
- Every mandate should be accompanied by a cost impact statement to identify the impact on the cost of health care.
What is “government intrusion in private contracts”?
Similar to government mandated premium increases, government intrusion in private contracts often results in a price increase to you and your employer, but it also results in the stripping away of your rights and benefits under your health plan.
Lately we have seen several of these intrusion attempts at the state Capitol. They may take the form of eliminating your health plan’s ability to negotiate with providers to secure a high quality, credentialed network of physicians, hospitals and labs for you to choose from. Network providers help to curb exorbitant premium increases by contracting negotiated (in most cases, reduced) reimbursement for medical care.
A simple example: Think of this as the government interfering into your agreement with your neighbor’s son to mow your grass. In this scenario, perhaps the government has decided that if you want to change the date your grass is mowed, you must re-negotiate the terms of the contract before you can change the date. This intrusion into your contract eliminates your ability to respond to outside factors and adjust accordingly. It adds a burden to you that was not necessary.
More relative to health coverage, as a member of a health plan you have a vast network of physicians, labs and pharmacies to choose from. You know that any one of these providers has been credentialed by your health plan to ensure the best of the best are available to you. As the government begins interfering in these private contracts between your health plan and your provider, your health plan loses its ability to provide a robust network of providers for you.
Again, as a member of a health plan, you have the luxury of knowing that the billing, payments and day-to-day issues around your health care are being handled by your health plan, on your behalf. Your health plan is able to negotiate the best rates and contracts for you. Simply put, government intrusion into private contracts takes away the health plan’s ability to negotiate the best deal for you.