May 15, 2015 News

Don’t Shoot the Messenger

When the price of a product is low, no one seems to care. But when product prices rise, everyone wants to know why. Suddenly, Congress is holding hearings, analysts are weighing in on major news networks, and the American public is paying attention. Rightfully so, you deserve to know where your hard-earned money is being spent.

When it comes to health care, price increases are often reflected in the cost of health insurance. Because most Americans (88 percent) have some type of health insurance, we feel the pinch when insurance premiums rise. Naturally, we want to blame insurance companies. After all, they’re the ones sending the bills. But the truth is, health plans – like CDPHP – have less to do with price increases than you might think. That’s especially true here in New York.

Prior Approval 101

In 2010, the New York State Legislature passed a law requiring health insurers to submit rate changes to the state. Commonly referred to as “prior approval,” the law requires state regulators to review these requests and determine if they’re justified. The state then decides to approve, modify, or reject the requests.

Last year, health plans across New York requested rate increases averaging 12.5 percent. The state responded by cutting those requests to 5.7 percent, despite the fact that health care costs actually increased by 8 percent.

While the state’s actions were praised in the court of public opinion, the decision ultimately led to millions of dollars in losses for the health insurance industry, and forced many plans to reduce the amount of doctors, products, and services they’re able to offer consumers.

2016 Rate Filings

In the coming months, health plans will once again submit rate requests to New York state. When they do, they’ll consider a number of factors.

Last year, spending on prescription drugs hit a whopping $374 billion in the U.S. In 2016, analysts expect pharmacy trends will continue on an upward trajectory, increasing by as much 13 percent. The story gets worse when you talk about specialty pharmaceuticals, which include the much-discussed drugs Sovaldi and Harvoni that are used to treat hepatitis C. In 2016, the cost of specialty drugs is expected to increase by as much 19.5 percent.

Another big factor in the price-setting process is increases from hospitals and physicians. Over the past five years, mergers and consolidations among health care providers have increased by 50 percent. According to the Robert Wood Johnson Foundation, these mergers have led to price increases often exceeding 20 percent.

To combat these trends, health plans are taking steps to reduce the cost of care while improving efficiencies. Many are rewarding doctors for quality over quantity; they’re focusing on improved access to services through care coordination and nurse case management; and they’re re-negotiating rates with doctors and vendors to ensure that consumers get the best care at the lowest prices, all while cutting administrative expenses to record lows.

No one likes when the cost of goods or services go up. That’s especially true in health care, but consumers must understand that your health plan is only the messenger. For its part, the state wants to demonstrate to the public that it’s able to control rising costs. The problem is that knocking down insurance rates through prior approval does not fundamentally change the cost of health care.

When your health insurance company sends you a notice in the coming weeks letting you know that your insurance premiums are increasing, please don’t shoot the messenger.

Listen to our podcast, What’s Really Driving up Your Health Insurance Premium, with Dr. Bennett.

Photo by geralt / CC0 Public Domain

John D. Bennett, MD, FACC, FACP
About the Author

John D. Bennett, MD, FACC, FACP, is president and CEO of Capital District Physicians’ Health Plan, Inc. (CDPHP), an award-winning, physician aligned, not-for-profit health plan based in Albany, NY. Bennett has held the position since 2008 after serving more than 10 years as chair, vice chair, and board member for CDPHP. During his tenure, CDPHP has been ranked among the top-performing health plans in New York and the nation, most recently named #1 in Customer Satisfaction in the 2023 J.D. Power Member Health Plan Study. Under his leadership, CDPHP has also become known as a model employer regionally and nationally and was recently named among the top five Best Companies to Work for in New York by the Society for Human Resource Management, as well as Forbes Best-in-State Employers 2022. Prior to joining CDPHP, Bennett served as founding member and CEO of Prime Care Physicians, PLLC. During his tenure, he co-led a team of 25 cardiologists and helped grow the practice to a 100-physician multi-specialty group. Bennett is board certified by the National Board of Medical Examiners and the American Board of Internal Medicine, with subspecialties in internal medicine and cardiology. He earned his medical degree at SUNY-Downstate Medical Center, Brooklyn, and a Bachelor of Science degree at Rensselaer Polytechnic Institute. Bennett completed an internship and residency in internal medicine and a fellowship in cardiovascular disease at Albany Medical Center. He is a Fellow of the American College of Cardiology and the American College of Physicians. Bennett is currently board chair for the Center for Economic Growth and the Capital Region Chamber, and vice chair for the Palace Theatre. Bennett also serves on the boards of the New York eHealth Collaborative (NYeC), the Alliance of Community Health Plans (ACHP), America’s Health Insurance Plans (AHIP), Rensselaer Polytechnic Institute, and Russell Sage Colleges. Bennett is a member of the New York Public Health and Health Planning Council where he helps shape decisions related to New York State's public health and health care delivery system. Well-known locally and nationally for advancing health care innovation, Bennett was recently named to Crain’s New York Business 2021 Notable in Health Care, as well as the Albany Business Review’s Power 50 list.

2 Responses to “Don’t Shoot the Messenger”

  1. guy

    I am a small business owner with a small plan. We cannot afford the $20,000 + yearly premiums for “regular” health coverage (whether we see a doctor for the year or not) so we went with “catastrophic” coverage, ie., a reduced monthly premium and a $10,000 deductible…CDPHP went from under $800/mon in 2013 to $898.66 in 2014, then $1129.92 in 2015 and now it is $1269.93…we are again paying nearly $15000,00 whether we see a doctor or NOT, and then on top of that we are paying $10,000 deductible…so in effect we are paying $15000 for the year and up to $25000 if see doctors on a more or less regular basis…SO WHAT THE HELL IS THE DIFFERENCE? IT IS RIDICULOUSLY OVER PRICED and it is the messenger’s FAULT for not reducing the bills instead of passing them along…

    • John D. Bennett, MD, FACC, FACP

      We apologize for your frustration with the high cost of health care. Unfortunately, this is a nationwide trend due to a number of factors, including rising hospital and pharmacy costs, as well as increased state and federal regulations. At CDPHP, we have a number of options available for small business owners. If you would like to review your choices to see if we have a plan that better suits your needs, please feel free to call your broker or contact CDPHP directly.

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