Take Five: 2022 could be a telltale year for health insurance

Feature M3 Health Insurance Trends Panel

The annual M3 Trends Report has some welcome news for local employers and a bit of a warning as to when the cost impact of the pandemic could kick in. The report notes that M3 clients in the south-central Wisconsin market experienced an overall rate increase of 4.2% in 2021, which is lower than the overall rate of 5.1%, and that M3 private sector clients experienced an overall cost increase of 5.4% compared to 4% for those in the public sector. According to the report, this continues a three-year trend in rates of change being lower than historical norms and is probably the result of decisions made by employers prior to the COVID-19 pandemic and lower than normal claims during the COVID-19 pandemic.

But in this Take Five interview, Brian Meyer, director of risk management for M3 Insurance, explains that the pandemic’s deferred care will likely have an impact on rates in 2022.

Based on the findings of the 2021 M3 Trends Report, what in your view is the key takeaway from this report for Madison-area employers? Is it the 4.2% growth in rates in the south-central Wisconsin market or is it something else?

Brian Meyer

Brian Meyer

“No, you’re right. Health care costs are increasing but from a historical perspective, they are increasing at a lower rate than we’ve historically seen. In the Madison area particularly, we see continued lower cost trends than we do in other areas of the state and nationally as well. Primarily with the HMO environment, we’re seeing more managed care and managing those health care costs year over year.”

Is that comparatively lower rate COVID-related because there was little appetite for changes in plan design this past year, or is it simply the continuation of an existing trend?

“I would say it’s not tied in specific to COVID. It’s more a trend on what we’ve seen in managing that care from an HMO environment. It would be too early to truly see the impact of cost in different pockets of the state or different parts of the country related to COVID costs with the data we were looking at. So, it’s more historical and lower cost trends with the managed care environment. It’s certainly something we would keep our eyes on in future years — the impact of the COVID cost over a longer period of time.”

Are we basically one year away from feeling the real effects of COVID on rates, and if so, what is that impact likely to be given all the deferred care that took place last spring?

“Yes, I would say it’s going to vary by employer. On the individual impacts, we’re going to see different variations of that for each employer, but on a broader picture, we’re going to have some components that will add to costs and some pieces — behavioral change — that will have a reduction in cost. When you think about telemedicine and the utilization of telemedicine, we saw the rise obviously during COVID and the pandemic, but we expect that utilization to continue with people having access and utilizing that service. We continue to see utilization on [lower cost] telemedicine at a higher rate than we have historically and lower nonemergent conditions going to the emergency room. So, that certainly helps the cost, but with deferred care and deferred preventive care and maintenance, we expect to see some of those costs rise. As we go into the future, we likely will see some added cost in total, given some of that deferred care and preventive care that wasn’t taking place at the same rates during the pandemic, and it will put pressure on rates as we go into 2022.”

Aside from the prevalence of HMOs in the Madison market, what other factor or factors result in Madison’s lower rate of growth compared to the rest of the state, which had a growth rate of 5.1%?

“It’s tough to draw out any additional conclusions out of that, other than the managed care environment is certainly a big driver of it. The quality of health care and access to quality health care are a component of that. So, those two pieces are contributing factors. Outside of that, it’s difficult to draw additional items on the health of the population driving some of that. We didn’t really study that data in the trend analysis that took place.”

Why do HMOs tend to be more cost effective? Is it because the care is physician directed rather than shareholder directed?

“Yes, that’s physician-directed care, so establishing your primary care and seeing care at a lower cost level, starting with the primary care, and then having that primary care from a referral pattern steering that care to the right services at the right time for those individuals helps manage that overall cost. Another component of that is having a narrower network, versus a broader network that is more open access and doesn’t require that primary care relationship and doesn’t necessarily drive some of that cost to the lowest cost care setting.”

The growth of high-deductible plans continues, at least for M3 clients. Do you expect this to continue only at a more gradual rate now that it’s 67% among your clients, especially because they can be more easily paired with a health savings account in Wisconsin?

“I do think it will grow at a more gradual rate. Individuals and employees want more choice in plan design and having a high-deductible plan in place, paired with a health savings account, is a valuable choice offering from an employee standpoint. That’s absolutely a contributing factor and something we see continuing in the future. I do feel that high-deductible plans will see continuing growth and we’ll continue to see growth in offerings, but it will start to level off given that we’ve got a large percentage of the overall client base that already offers a high-deductible plan today. We continue to see that valued by employers and employees and having that choice environment where you can have a high deductible and you might have other plans that you’re pairing a high-deductible plan with as well.”

Is a high-deductible plan appealing to all demographic groups in the workforce — young and old — or is it primarily the younger, healthier people who find it to be the more advantageous plan for them?

“No, I would say it’s a mix. Certainly, the younger population does value that, from having the potential to save long-term the health care dollars, having the tax advantage of a health savings account, and potentially having a lower contribution. We also see the older demographic value the health savings aspect for continuing to save some of those health savings dollars as they get closer to retirement age and have some health dollars available longer-term for them. So, it is appealing to those segments of the population but for different reasons.”

Madison of course has a large number of public-sector employees, so is there any particular reason that among M3’s customer base, that there was a return to the historic norm of the public sector’s rate of change growing slower than that of the private sector? Was the pandemic a contributing factor?

“The pandemic was a factor in that. When we look at the timing of public sector renewals and overall cost impact, particularly RA71 mid-year renewal in most of the public sector, and if you think about when the pandemic took place, in that environment we saw most of the public sector renewals being done on the early side of the pandemic. They were more open to making change in plan design, and carriers were setting those rates earlier on in the pandemic.

“When we look at private sector [renewals], that was later on in the pandemic, and we saw more reluctance to make changes, more reluctance to change plan design, and more reluctance to change carriers because employers wanted stability for their populations. We saw less change take place in the private sector, and that is a contributing factor to those differences.”

From your vantagepoint, are there other key takeaways from this year’s trends report that area employers should take note of?

“Overall, we continue to see stability over the last several years on health care costs, slowing the rate of increase that we’ve seen from a historical perspective. As we go forward though the pandemic and some of the deferred care as well as deferred preventive care comes back, that is something that employers as well as M3 are being mindful of — that uncertainty and potential pressure on some of those health care costs. We had more stability both in cost and plan design during the pandemic than we had in a typical year as you look back from a historical perspective.”

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