The Division of Insurance’s Health Care Access Bureau Reports on Health Care Costs
The Health Care Access Bureau, the Division of Insurance bureau charged (by Chapter 58) with oversight of the small group and non-group markets and affordable health insurance, took its first major action last month when it released two reports on health care costs.
The first report, Analysis of Administrative Expenses for Health Insurance Companies in Massachusetts, dug deep into the finances of Massachusetts HMO's and BCBS plans to determine how much of our premium dollars are being spent on administrative expenses (as opposed to medical care). According to the study, Massachusetts health plans cumulatively spend about 10.9% of each premium dollar on administrative expenses, compared to the national average of 11.6%. In raw dollars, between 2002 to 2007, Massachusetts health plans spent $33.34 per member per month on administrative and claims handling expenses. Of the health plans examined, Neighborhood Health Plan spent the lowest share of each premium dollar on administrative expenses (8.1%) and ConnectiCare and United spent the most on administrative expenses (15.6% and 14.0%, respectively). The report found that Massachusetts health plans spend 86.5 cents of each premium dollar on benefits on average (as compared to 84.9 cents nationally).
The second report, Trends in Health Claims for Fully-Insured, Health Maintenance Organizations in Massachusetts, 2002 - 2006, focuses on medical care spending. After scrutinizing medical and pharmacy claims for over 2 million Massachusetts residents covered by fully-insured, group policies from HMOs, the report found that advances in medical technology and the costs of medical services are responsible for much of the increase in the cost of health care. From 2002 to 2006, the insured population remained at the same level of health and utilized services at roughly the same rate, but the total cost of medical services per insured member per month increased by 55%. The report broke down health care costs into several dimensions:
- The cost of inpatient hospital services increased at an average annual rate of 9.2%, though the utilization of inpatient hospitals services remained stable. Hospital inpatient costs increases accounted for the majority of the overall change in cost per member.
- The average cost of outpatient hospital services increased by 15.9% per year. Analysis shows that overall cost increases are driven by the cost of services rather than by the number of services provided.
- The cost of physician services increased by 10% annually.
- The cost of prescription drugs and supplies increased by 10% annually, at the same time that the use of generic drugs increased dramatically.
Consumers felt these higher cost not only through higher premiums, but also through higher cost-sharing. In fact, insured consumers are paying a higher percentage of their health care costs. The amounts that insured consumers pay in copayments, coinsurance, and deductibles increased to 9% in 2006 from 8% in 2002.