It’s that dreaded time of the year: renewal time. What will your client’s health insurance increase look like? Fifteen percent? Twenty percent? More?
Premium increases are a fact of life for health producers and consumers in the 21st century. In the Agent Media 2010 Health Market Study, 36 percent of agents said rate increases were one of their main challenges with selling individual health insurance, making it the No. 3 sales challenge this year. We expect double-digit increases, and our clients expect them, too. As with any aspect of selling insurance, it is the producer’s responsibility to act as educator for their clients so they can understand why premiums consistently rise at such a high rate. Only then can we sit on the same side of the table as our clients and work together to find an affordable solution for their needs.
So what makes premiums rise at two, three, and even four times the rate of inflation? Despite the health care reform media barrage, insurance company profits are not the culprit. Instead, three major components are conspiring to increase premiums: Technological innovation, consumer demand, and cost-shifting from government programs to commercial insurers.
1 Technological innovation
Every day in our advanced scientific world, a medical breakthrough occurs. Each of these new technologies and medications has a tremendous cost. Each new brand name drug can cost 10 to 20 times as much as a generic drug that treats the same illness. Fifteen years ago, if you twisted your ankle, your doctor took an X-ray. If nothing was broken, they would wrap it in an ACE bandage and tell you to stay off your leg for a week. Now, you are immediately referred for an MRI at a cost of $500 to $3,000, depending on the facility. Often, the medical outcome is the same, but the cost is passed on to each of us in higher premiums.
2 Consumer demand
As far as consumer demand being a driver of higher costs, put yourself in your clients’ shoes. We all want lower costs, except when it is our own health at stake. We all say “lower costs,” as long as our procedure is approved. At the pharmacy counter, we say “lower costs,” as long as the pharmacist approves the doctor’s script without question. We all say “lower costs,” as long as the facility we need to visit is in-network and approved.
Until we as Americans are willing to make some tough choices and be flexible about how much care and access to care we are willing to compromise, costs will continue to rise. We can’t all have Rolls Royce health care, unless each of us is willing to pay for and able to afford Rolls Royce health care.
3 Cost shifting
The third issue is the hidden costs that will drive up rates under the new reform laws in both the small-group and individual markets. The legislation, as approved, pays for a part of the increased Medicaid enrollment by decreasing the payments providers receive from Medicare and Medicaid. In many instances, your doctor and/or hospital loses money each time a Medicaid or Medicare case comes in the door. The only way providers can make up that deficit is by increasing costs to the private sector. Your insurance premiums subsidize government programs – a practice that will only increase going forward.
Now – what can you do?
So now that we now know why premiums are on the rise, we must effectively deal with clients who say they cannot afford those rising premiums.
First off, if a client truly doesn’t have the money, do the right thing and refer them to the appropriate government program. Being broke is a condition – not an objection. No salesperson can overcome a condition.
If they are complaining about higher costs, educate them, let them know why this is the case, and work with them to find a solution. That solution will most often be a higher degree of cost sharing than they currently have, such as higher deductibles, higher copayments, and higher co-insurance. Make these options work for the client. Ask questions and find out your client’s needs and where they might be willing to compromise on their benefits. Are they willing to stay in network? Are they willing to accept a $5,000 tab if they need to stay in the hospital? Maybe a catastrophic plan will work? Are they comfortable only having access to generic drugs? Find out where your client is willing to compromise.
Remember to always make the point that some HIPPA-compliant coverage is better than no coverage at all. This will protect your client from any pre-existing condition exclusions that might occur until guaranteed issue and community ratings are nationally implemented.
Reform or no reform, costs will continue to rise, and we will have to continue to educate our clients about making tough financial decisions about their health care. As the reform legislation failed to address the cost of coverage, these issues are ones we will continue to face. Health insurance premiums are not going down any time soon – so take action and help your clients do the same.
William M. Friedman is the senior vice president of direct sales for Atlantis Health Plan. He can be reached at [email protected] or 212-747-8275.