The Society for Human Resource Management released a report on the top trends that will affect US businesses in 2005. It comes as no surprise that health care costs led the way, with 57% of respondents naming this issue as the top management concern.
Compare this with a survey conducted last year on opinions of P&C insurance execs, who did not include health care costs in their top eight issues of the year.
Why? Is P&C insurance not affected by health care? No, actually one of the largest cost drivers of medmal, liability, workers comp, private and fleet auto, etc (P&C insurance lines) is health care.
Do P&C carriers have health care costs under control? No, a recent survey indicates medical inflation in one key P&C line is 12% annually, a rate that is significantly higher than overall medical trend.
So why the disconnect?
My guess, and it is only a guess, is a cultural inability to grasp the importance of medical trend. Most P&C insurance execs grew up in the business, viewing claims and the health care part of claims as financial numbers, and thus do not understand health care beyond its’ financial implications. It is viewed as a constant, a black hole, a great unknowable. I’ve heard one exec state “claims are claims, trend is trend”.
With this attitude, no wonder the trend rate is 12%.
Jan
6
“claims are claims, trend is trend”.
I heard this a lot in the 70’s. If it ever made sense, that was the time. But not since then has it made sense.
There is no distinction that can ultimately be drawn between “claims” and “trend”. One cannot begin to understand either without delving into the practice of modern health care and thence becoming as frustrated and baffled as the rest of us.
Reflection will reveal that trend IS claims. And claims will most definitely differ by insurer, as the logical consequence of “networks”. I don’t know that employee benefits managers have more insight on this than P & C managers who after all are responsible for worker comp programmes. Is this an argument to reallocate functions of corporate risk management? No. Not necessarily. It may be part of an argument to combine them.