Magazine September 2019

A Look Behind the Health Insurance Curtain

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by Mark Carter

With open enrollment just around the corner, three of Arkansas’ largest health insurance providers lent Arkansas Money & Politics their leaders for some Q-and-A that shines a light on the business of insurance and how it impacts consumers.

Curtis Barnett, CEO, Arkansas
Blue Cross and Blue Shield

What percentage of industry costs is devoted to preventative care? Approximately 5-6 percent on average is devoted to preventative care.

What factors go into determining the cost of a health-insurance plan? Each year when proposed premium rates are filed for the upcoming year, we look at four primary components. Those elements are health-care delivery costs, general business expenses, state and federal taxes and risk margins.

Health care delivery costs are the dollars we pay to hospitals, treatment facilities, physicians and pharmacies. Generally, these comprise more than 80 percent of our total costs for most lines of business. Additionally, we have general business expenses such as processing and paying claims, providing customer service to help our members navigate the health care delivery system, complying with government regulations and similar administrative tasks. These form between 10 and 15 percent of our premiums. 

Then, we add premium taxes, health insurance taxes, exchange fees and an assortment of other taxes that can form between 3 and 6 percent of premiums. Lastly, our industry typically adds a risk margin of between 2 and 4 percent. This is done to maintain financial strength and to help prevent insolvencies when costs run higher than anticipated or when emergencies or disasters occur.

It’s important to remember that we are guaranteeing a fixed premium rate for a set time period in the future even if the cost of providing such care increases during that future time period.

 How are out-of-pocket costs such as co-pays determined? A variety of co-payments and out-of-pocket costs are offered so consumers can choose what best fits their health care and financial situation. In theory, co-payments are designed to encourage the most effective utilization of the medical delivery system and to encourage members to use less costly yet similarly effective services. That’s why many times there are no or very low co-payments for generic drugs and preventative services and while co-payments for an urgent care clinic may be lower than an emergency room visit.

 Specific dollar amounts for co-pays are an attempt to balance premium levels, appropriate utilization and the demand in our specific marketplace. 

 Is the Affordable Care Act, in some capacity, here to stay? The Affordable Care Act provides broad-based access to health care both nationally and here in Arkansas. We drastically reduced the number of uninsured Arkansans and made access available to people who may have had little if any previous health care.

 Additionally, the ACA has given our hospitals relief from uncompensated care during a time when rural health care is struggling to continue serving those areas.

Whether it’s ensuring that folks with pre-existing conditions can get insurance or allowing young adults to stay on their parents’ policy until age 26, I believe we’ve seen a recognition of some very good things in the Affordable Care Act.

 My hope is that decision makers and other stakeholders in the health-care delivery system build upon the broad-based access achieved by the ACA and work to address cost and best practices as we move forward.

 

Jim Casey, CEO, USAble Life and
Life & Specialty Ventures

Do you feel that consumers appreciate the value of supplemental insurance products? Our customers who have supplemental insurance appreciate the benefits and understand first-hand the critical financial protection they provide when they’ve experienced an unexpected medical event.

For example, school teachers in Arkansas who have these products value them, keep them and understand that they will provide the extra cash they need if they or a covered family member has an accident, is diagnosed with a critical illness or must be hospitalized.

Supplemental insurance can often save a family undergoing an unfortunate medical event from experiencing financial catastrophe. 

Do you foresee the addition of more supplemental products to the marketplace? I don’t see different types of supplemental insurance on the horizon, but I do see different variations and combinations of the benefits we already offer — accident, critical illness and hospital indemnity insurance.

As financial insecurity continues to be a worry, supplemental insurance will be important to protect individuals and families, especially with rising medical deductibles. According to the Life Insurance Marketing and Research Association (LIMRA), the number of carriers offering supplemental products has doubled in the last five years.

And a 2018 benefits study from the Society of Human Resource Management reveals that more employers are offering these benefits — 66 percent offer accident insurance, 40 percent offer critical illness, 26 percent offer hospital indemnity insurance and 56 percent of employers offer health savings accounts.

Ed Choate, Delta Dental of Arkansas

Do all private group plans include some form of dental and vision coverage? More than 80 percent of larger companies (200-plus employees) and approximately 50 percent of smaller companies (3-199 employees) provide dental and vision benefits to their employees. 

 Individuals and families can also purchase dental and vision insurance directly from insurance companies. Delta Dental offers both dental and vision along with a free hearing health care plan to Arkansans who do not have access to coverage.

 Is dental and vision coverage included in Medicare and other forms of public insurance?

Medicare doesn’t cover routine dental or vision care. However, most private Medicare Advantage plans offer benefits for both dental and vision. The Arkansas Medicaid program provides dental and vision benefits for both adults and children. Delta Dental is one of the companies providing dental benefits to approximately 300,000 Medicaid beneficiaries in Arkansas.

 How many Arkansans have dental benefits and where do they get them? According to the National Association of Dental Plans, 77 percent of the Arkansas population has dental benefits. Forty-seven percent receives dental benefits through employee benefits at work; 27 percent through public programs (e.g. Medicaid); 22 percent has no dental coverage and 4 percent purchases directly from an insurance company. More than 800,000 Arkansans have coverage with Delta Dental.

 For businesses, what are the advantages of offering dental and vision benefits? A comprehensive health benefits plan helps businesses attract, acquire and retain talented employees.

 Better health, dental and vision insurance topped the list of a Harvard Business Review study in which 88 percent of working Americans said they would give these benefits “some consideration” (34 percent) or “heavy consideration” (54 percent) when choosing a job.

 Dental and vision coverage also contribute to a healthier workforce with fewer missed hours because of mouth or eye problems. Because dental and vision insurance generally cover 100 percent of preventive care, this coverage increases the chance of employees getting care before an issue creates more serious health concerns, potentially requiring costly procedures. 

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