Spiraling medical claim costs and ever-increasing health insurance premiums

Here is a hypothetical cycle of events that ends in disaster for all.

1. Customer buys health insurance.

2. Customer pays premium at a fair rate.

3. Customer gets sick and goes to hospital.

4. Hospital sends invoice to insurance company.

5. Invoice is not open to negotiation, insurance pays or customer pays.

6. If customer is forced to pay, the insurance company may lose the customer at a later date.

7. If insurance company pays, the hospital knows there is a possibility of increasing prices even more for future claims.

8. Customer’s claims are reluctantly paid by the insurance company even though they suspect they are being overcharged.

9. Each year, hospitals continue raise their rates……the technical term is called “MEDICAL INFLATION”.

10. Each year, insurance companies see their Loss-ratio increase due to the higher medical costs.

11. Each year, insurance companies are forced to raise premiums to cover these ever-increasing medical costs.

12. Each year, the final knock-on effect is the policyholders have to pay higher premium rates.

13. This cycle is repeated every year, the medical costs rise and the premiums increase.

14. Finally………. after many years, the policyholder is unable to pay the excessive premiums.

15. Each year, more and more policyholders choose not to renew their insurance because it’s too expensive.

16. In the beginning, Insurance companies will not be affected by the slight decline of high-premium-paying customers.

17. But as premiums rise higher, an ever-increasing percentage of customers choose not renew their policies.

18. The insurance companies will suffer a reduced growth of their portfolio.

19. When the premiums of customers not renewing policies approaches the premiums of new customers, insurance company gross premium income will start to shrink.

20. When insurance company new sales and policy renewal income drops further, premiums have to be increased by higher percentages each year.

21. The ratio of higher annual-premium-increases is directly related to the higher percentage of customers that drop out.

22. Somewhere in the future, insurance companies will not have a sufficient portfolio of customers to sustain their business.

23. As a last-ditch effort to contain costs and stay profitable, insurance companies might resort to black-listing expensive hospitals with a record of overcharging.

24. This black-list will grow in each year, gradually reducing the number of hospitals that insured customers are able to use.

25. Customers will be inconvenienced as the black-list grows larger.

26. The two factors working together will spell doom for insurance companies; ever-increasing premiums and a growing hospital black-list.

27. One of two things will happen;

      27.1 The black-list will grow so large, it includes all hospitals;

      27.2 Or the premiums will be so high, no customers can afford health insurance.


What happens to the hospitals?

1. In the beginning, hospitals will see a success in their billing practices.

2. They will continue to increase medical charges because insurance companies are forced to pay to keep using the hospital facilities.

3. As years pass on, hospitals get bolder and bolder with their invoices.

4. Insurance companies can only play catch-up as the medical costs spiral ever upwards.

5. Only when a high enough percentage of customers refuse to renew their insurance, will the hospitals see the effect on their income.

6. Customers without insurance cover will start to shop around for cheaper treatment at alternate hospitals.

7. Expensive hospitals will start to offer discounts to try and attract customers (without insurance), back to use their services.

8. This discounting will only make the insurance companies suffer more.

9. The loss of income in discounts will be compensated by higher charges to insurance company claims.

10. When the insurance companies stop cooperating with expensive hospitals, these hospitals will start their own black-list of insurance companies.

11. As the hospitals add more insurance companies to their black-list, the hospitals will start to find ways to attract customers without insurance.

12. Hospital incomes will drop because of the combination of heavy discounting practice to keep (non-insured) direct-customers and the loss of insurance-company-customers that are told to use alternate hospitals with cheaper medical costs.

13. Two factors working together will create problems for the hospitals; ever increasing medical costs and a growing insurance company black-list.

 

There is a solution to this hypothetical situation.

The solution is very simple to implement.

Customers will be rewarded for using their health insurance in a prudent manner.

Hospitals will be rewarded for quality health care at the right price.

Insurance companies will see their loss-ratios remain stable without the need to increase premiums at ridiculous rates.

How is all this possible?

Send me a message and I will share my ideas with you.