By Patrick Thornton, CEO at Anderson Thornton Consulting–
Health Insurance rates are constantly on the rise. With a moderate annual rate increase of 8%, a $450 premium will double to $900 in 9 years. Under Healthcare Reform, insurance carriers are only allowed to keep 15% of the premiums paid by large employers as their profit. This provision is known as the Medical Loss Ratio. Carriers make more profit when premiums increase. This puts the carrier’s objectives, maximizing shareholder wealth, in direct conflict with the employer’s objectives, which is to keep costs down.
Healthcare costs are one of the largest expenses facing employers. Starbucks spends more on healthcare than it spends on coffee beans. Carriers have no incentives to keep costs down. Higher costs bring bigger profits. This is a topic I will discuss in a future article.
It is up to employers to take control of their own healthcare supply chain. By reconstructing the healthcare ecosystem, employers can save up to 30% on their premiums and provide better benefits to their employees. The key is understanding how to do it.
Patrick Thornton is a former HCA Hospital CFO and currently works as a risk management consultant for health insurance plans. He is passionate about the healthcare delivery system and helping employers find solutions to the rising costs of health insurance.