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Understanding
What Drives Up the Cost of Health Care
What’s
really behind today’s higher health care costs? There are no
simple answers, or easy targets to blame.
Several issues and players have an impact. The following
information was provided by William M. Mercer, Incorporated, OSBA’s
insurance consultant.
Health
care providers are demanding fee increases
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Oregon
is feeling the effects of a physician shortage. Doctors in
Oregon have historically been paid less than those in other
states and this is being magnified by the increase in the
state’s cost of living figures. Retaining and recruiting
physicians is more costly than ever.
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The
physician shortage means that physician practices are full
and physicians do not feel the need to discount their fees.
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Physicians
are leaving the "managed care system" to more
directly control their patients’ care and regain more
financial independence.
Oregon’s
aging population increases demand for medical care
Insurance
companies have little choice but to raise rates
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Most
Oregon insurers have operated at a loss while holding down
premiums to increase market share and now must raise rates to
maintain their long-term viability.
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All
insurers are struggling to stabilize provider networks by
creating financially attractive contract arrangements that
will encourage providers to stay in their PPO (Preferred
Provider Organization) and HMO networks. Higher fee schedules
result.
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Health
care inflation is running at three times the rate of the
general consumer price index and trends suggest there is no
relief in sight so rate increases cannot be deferred any
longer.
Employers
and employees search for ways to cope
Schools
and their employees are struggling to deal with the escalating
cost of health care benefits at the same time they are suffering
budget cutbacks. Common strategies include changing to lower-cost
benefit plans and sharing higher costs through premium rate caps.
Advantages
of OSBA-sponsored health plans
OSBA
Insurance Trust negotiates aggressively to assure that its plans
receive the most competitive renewal terms. The Trust’s size
(number of people enrolled in programs) is used as leverage to
obtain the most advantageous rates for school districts.
The
OSBA Insurance Trust also has the ability to moderate the
magnitude of rate increases by "buying down" increases
through using its reserves. While subject to trustee approval each
year, during the last five years, savings from reserves have
averaged four percent annually.
The
OSBA program includes a variety of plan choices which allow
schools ample selection to meet their benefit and financial needs.
Many districts are eligible to offer more than one plan option to
create employee choice. And, there are plenty of lower cost plans
to consider with new options to be introduced this summer in
response to member requests.
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