What is NOT Trend? : The Invisible Hand Behind Rate Increases

The Latest Industry Buzzword 

Every community has a system of beliefs that they automatically assume to be true. For the veterans that have kept their heads above water in the  Healthcare Brokerage industry, you know that the latest fashion of the times has been to establish “trends” and “price increases” as synonymous. While trends do function as global underlying pressures on claims costs that must be considered into every book of business, they do not act as the sole predictor of rate construction or premium claim projections.

What is NOT Trend

Let’s imagine a couple of scenarios that validate this line of thinking. Say you were to experience a  price increase because the carrier miscalculated their pooling charges last year. Would that price increase be a direct result of trend? Or what if your client added a new subsidiary in a high COL area of the country? At first this fact doesn’t bother you, until you realize that this geographical change doubles the number of bodies on the plan. Hence, resulting in another price increase.

The Building Blocks of “Trend”

These scenarios exist due to the seemingly invisible factors that have a direct correlation upon price. We like to make the memorization of these factors easy, using the acronym Q.U.A.S.T.I.C.

• Quality – The quality of the benefits provided to utilizers.
• Utilization – The percentage of participants taking advantage of available  benefits.
• Addition -The inclusion of  supplemental coverage, or the increase of frequency available for benefit utilization. 
• Substitution – The substitution of one medical care and medical services for an equal or more expensive alternative. 
• Technology – The adoption of apps, software, or tele-medicine capabilities.
• Inflation – The increase in price due to the rising costs associated with factors of production. 
• Cost Shifting –  The manipulation of commercial patient costs to recoup the losses incurred from servicing Medicare and Medicaid patients. 

Becoming familiar with the total gamut of factors that drive rising claim costs is the first step in understanding our complex landscape. 

Now that you’ve made it this far, the next challenge is to use this knowledge to leverage better results for you and your clients. 

Take the plunge and learn the latter in this week’s lesson. 

In this lesson we cover:

• The Top 5 Reasons for Rate Increases 
• Cost Shifting’s role in skyrocketing Commercial Patent Rates 
• A Broker’s Strategy Guide for negotiating better rates for their clients
• The Competitive Advantage of Family Deductible Plans 

To a better you!

John Sbrocco & the team at Heads Up Adviser

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