MEDARVA: The One Percent

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Health insurance costs for many are driven up by a few.

By Donna Gregory Burch
Henrico Monthly
August 2014

As health care costs rise, so does the expense of providing health insurance benefits for county employees and their dependents.

Last fiscal year, Chesterfield and Henrico counties spent a combined $1.3 billion for employee health insurance, and rates typically increase every year. Since localities depend on tax revenues to fund such expenses, county taxpayers ultimately pick up the tab. 

Seriously ill employees are one of the biggest contributors to rate hikes. “Premiums are based on your prior year’s claims, so the higher your claims are, the higher your rates are going to be for the next year,” explains Scott Zaremba, Chesterfield’s director of human resources.

The sickest employees and dependents drive up the costs for everyone. “Industry data shows the top 1 percent of members account for approximately 22 percent of claims costs, and the top 5 percent account for about 50 percent,” says Scott Golden, spokesperson for Anthem, which administers Chesterfield and Henrico’s health insurance plans. 

County data mirrors those national figures. 

In Chesterfield, during the one-year period from April 1, 2013, to March 31, this year, there were 146 employees and dependents who individually filed claims in excess of $75,000 each. That group represents less than 1 percent of those covered by the county’s health insurance plan, but it accounts for 28 percent of the total claims for the year.

Henrico’s numbers are similar. There were 124 employees and dependents with claims exceeding $75,000 each during the one-year period from May 1, 2013, to April 30, this year. Like Chesterfield, that group represents less than 1 percent of those covered by Henrico’s plan, but accounts for almost 26 percent of total claims for the year.

In comparison, the average claim amount for both counties was about $4,000 to $4,500 – far less than claims filed by the sickest members mentioned above. 

Obviously, some health conditions lead to higher claims than others. A few of the most expensive treatment categories for both counties included musculoskeletal (examples: hip replacements, knee replacements and back injuries) and cancer and circulatory (examples: heart attacks and bypass surgeries). 

Yearly rate increases for health insurance are the norm, unless a locality opts to adjust benefits. In fact, health insurance rates for county and school system employees have risen by about 21 percent in Chesterfield and nearly 26 percent in Henrico over the past five years.

“In determining future rates, we look at claims history and apply trends based on expected cost changes,” Golden says. 

According to Golden, there are tools health care consumers can use to help them make educated decisions. Anthem members can compare quality and cost metrics for hospitals in their area. 

“For example, if you are having a knee replacement surgery, you can compare what your out-of-pocket cost will be at different hospitals and also how successful the surgery will be (i.e. complications, etc.) at those facilities,” he says. “There are more than 175 procedures on the [Anthem] website that members can research the cost and quality for.”

Some independent health care providers have also recently started posting out-of-pocket pricing for procedures on their websites.

Both counties use certain strategies to help hold down costs. 

“We do everything we can to decrease that increase because it’s a given that it’s going to go up,” says Paula Reid, Henrico’s director of human resources.

Chesterfield and Henrico counties join with their respective school systems to shop for better rates “because it gives us better buying power,” Reid says.

Both counties also offer wellness programming to improve the overall health of their employees. 

Through Chesterfield’s C-Fit program, employees can attend fitness and nutrition classes, health screenings, smoking cessation programs and the county’s annual health fairs. This summer, C-Fit’s new “Walking Wednesday” initiative will encourage county employees to walk before or after work or during their lunch hours. 

“It’s really getting people to use the wonderful trails in and around the government complex,” explains Lynne Wingfield, Chesterfield’s employee and wellness coordinator. 

In Henrico, employees can work out in the county’s on-site gym near the government complex. Certified fitness trainers teach health and wellness classes before and after work and during lunch hours. An employee clinic provides routine health screenings. Last spring, Henrico paid the entry fees for about 700 employees to run or walk in the annual Monument Avenue 10K. 

Wingfield admits that it’s difficult to prove that employee wellness programs actually lead to lower health insurance rates. “Figuring out return-on-investment is a really hard thing,” she says. 

But national research suggests that employers save $3 for every dollar spent on employee wellness programming. 

“At this point, there are enough companies that have implemented employee wellness programs that they are starting to see where the successes are,” Wingfield says. “They are starting to see a trend, so we can tell what makes a wellness program successful.”