More from the “group health” side of the Coventry call…
In general, a very strong quarter for one of the mid-tier players in managed care. Loss ratios were down, medical trend slightly decreased, and efforts are underway to address some of the key components of medical inflation, notably imaging.
There was some talk about increasing copays and deductibles, a “cost containment” mechanism from the early days of health insurance. These are now called “benefit buydowns”…
Details –
In line with other managed care players, medical cost pmpm trends were at 8.1% for the first quarter, which was mirrored by their Medicaid and medicare business. This was driven by better utilization (volume of services delivered), with inpatient utilization and pharmacy trending well. For pharmacy trend, Coventry also saw “more favorable unit cost and utilization.”
Medical Loss Ratios improved significantly; my sense is this was likely driven by the improvements in utilization coupled with premium rate increases.
Coventry execs talked about the components of medical expense in some detail, paying especial attention to diagnostic imaging. Evidently they are working hard on this area as costs are increasing. Specifically, Coventry is looking to cut unit prices. They are also trying a somewhat unique approach which will bear watching, purchasing imaging on a capitated basis from a vendor for imaging. In addition, they are using precert on all significant imaging in most markets.
On the benefit design side, Coventry is selling more higher deductibles and copay programs, referred to as “benefit buydowns.” For those of us old enough to remember, these appear to be nothing more than cost shifting of initial expenses to the plan member. This has been extended to specific service lines, including “benefit buydowns” in pharmacy.
Consumer Directed Health Planss – they have one, it is in the market place, although they have not seen huge demand due to their smaller size market – have 10k members in some form of that, expect it will grow but “unlikely to be exponential”.
Want to write a few large accounts and keep the “small group engine” going.
What does this mean for you?
Medical inflation is not tamed, but more under control than in prior quarters – this is consistent with other managed care firm results, so if you are not seeing a leveling off of the “rate of increase”, you’re doing something wrong.
Attention to the drivers of trend, notably imaging, is growing, and reflects a deeper understanding of the nuances of health care. Simply put, you cannot manage imaging like you manage hospital expenses. If you haven’t figured this out yet, get with the program.
May
6
