THE LAW OF DISPROPORTIONATE COSTS: SMALL NUMBER OF EMPLOYEES ACCOUNT FOR LION’S SHARE OF GROUP HEALTH PLAN MEDICAL COSTS
There’s plenty of cost related analytics available to support the disproportionate cost premise that medical expenses are highly concentrated among a very small proportion of enrolled employees. These highlights, for example, from a Agency for Healthcare Research and Policy (AHRQ) are pretty telling:
- 1 % of the population accounts for 21.4 % of total health care expenditures nationally
- 5 % of the population account for 49.9 % of total expenditures
- 10 % of accounts for 65.6 % of all medical costs
Now, results of a new study conducted by the American Health Policy Institute (AHPI) that are specific to employer group health plans further underscore the disproportionate cost premise. According to the AHPI, of those enrolled in employer-sponsored group health plans:
- Less than 2 % of employees account for 31 % of spending in employer health plans.
These findings serve to further underscore a key tenet of BBG’s SharedFunding program. SharedFunding is a battle tested strategy employed by many of our clients to control costs and keep benefits strong for their employees. The aforementioned tenet centers on the fact that medical services are consumed very unevenly within any employer group or population.
Employers that implement SharedFunding recognize that a very small number of their people account for the lion’s share of their group’s medical costs. Employers strategically combine higher deductible lower cost insurance plans with SharedFunding reimbursement plans to construct the best and most cost efficient coverage for their group.
This approach lowers the employer’s (and employees) total costs and provides employees with much stronger coverage. And, employers are protected from the risk and financial exposure associated with self-insurance.
Here’s more info on each of the respective studies: