Decline in doctor visits impacts calculations of insurance costs

The slowdown in patient volume is translating to a slower rise in insurance premiums, according to the latest poll of insurers by Buck Consultants, part of Xerox Corp.

The firm polls insurers to find an average medical trend — the rate of increase in what insurers spend on members’ health care — and the most recent answers averaged out to the lowest pace of growth in a decade.

The medical trend is one factor insurers use to set premiums, along with prior period losses and changes in benefits and insurers’ administrative expenses. The average medical trend used for PPO, HMO, Medicare supplement and high-deductible plans averaged 9.9% for the premiums that took effect in July 2011, according to Buck’s most recent report, released in April.

The trend does not include the impact of benefit design changes like higher deductibles and co-pays and less generous coverage. Accounting for those things, the average would have been lower, said Dan Levin, a principal consultant and actuary for Buck Consultants. The firm’s poll is designed to be used by their clients and self-insured employers who want to use the numbers to predict their medical costs.

“One of the factors is the continued economic slowdown,” he said. “Employees are trying to reduce their out-of-pocket costs and postponing services that are maybe not critical or are elective.”

That postponement and hesitancy to visit doctors has been tracked elsewhere, including by Thomson Reuters and the Kaiser Family Foundation.

Physician office visits by privately insured patients younger than 65 fell 17% between 2009 and 2011, according to a Kaiser Family Foundation analysis released in November 2011.

The IMS Institute for Healthcare Informatics reported in April that visits to physician offices declined 4.7% in 2011, after a 4.2% drop in 2010. IMS data comes from a sample of 4,100 physicians reporting on two days of office visits each quarter.

Levin said the lower medical trend used in the second half of 2011 also may be due to the elimination of additional margin insurers built into premiums to cover the cost of mandates in the Patient Protection and Affordable Care Act. Those included covering young adults up to age 26 on their parents’ plans and ending co-pays for preventive visits and lifetime benefit limits. The additional margin turned out to be unnecessary because insurers generally saw unexpectedly low medical costs in 2011.

Although the 9.9% medical trend is the lowest it has been since 2001, the Buck Consultants report noted that the trend continues to outpace inflation, which was 3.2% in 2011. The report’s authors attributed that to a long list of factors, including the cost of defensive medicine, rising medical liability insurance costs, cost-shifting from public to private payers and government-mandated benefits.

The price of health insurance in the last decade has risen much more quickly than growth of wages, according to Kaiser. The cost of family coverage has increased 113% since 2001, while wages rose 34% and inflation was 27% during the period. As premiums have gone up, deductibles and cost-sharing also have increased, making it harder for even insured workers to afford care, the foundation reported in its most recent analysis of health insurance coverage.

The annual premium for employer-sponsored health coverage for a family increased by 9% in 2011 to $15,073, according to the most recent “Employer Health Benefits Survey” by Kaiser and Health Research & Educational Trust. Workers on average pay $4,129 and employers pay $10,944 toward those annual premiums, according to the report.