Cost Trend Update-Getzen Model

Hello Everyone. This is not a "rant" but an information notice. I know that there aren't many who read the Society of Actuaries Reports (SOA), but often they have very informative information that all of us, particularly, in the health care business arena should pay close to attention to. Below is an email I sent out to my colleagues who work with me on a day in and day out basis. Below that email is a link. After I thought about it, I decided to post this as an article here. Quite frankly, I get a little annoyed at a large number of posts that should be on something like Face Book rather than Linked Inn, but we all have our opinions don't we?

Today, once I’m finished reviewing, I will be sending you the SOA (society of Actuaries) health report relying on the Getzen Model of long Run Medical Cost Trends. This is not “quick” review reading.  However, it is an actuarial formulation as to how they believe health care cost trends can be projected forward over time, using inputs of inflation-GDP change, capital income change, and estimated technology change factors. There is always a deviation to the mean as plus and minus factors, however, this is great information to know. People,most of our customers and clients, really do not have an idea as to how medical trend factors, nationally, are estimated. This tells us how the SOA uses “one way” of doing those estimations.

Now, the output model tells us that moving forward, in the short term-3 to 4 years, we can use a 4.5% annualized factor. Essentially then, using 4.5% change progressively over 4 years, guess what? That means around 24% increase. If we estimate today that our Wisconsin cost per employee per year is around $10,500 to $11,000, then what does that mean for employers moving forward? This is an estimation based on 1.5% GDP growth factor application. While there are limitation factors in the applications, what does it mean if: 1) Inflation increases, 2) GDP growth is more, or if GDP is less, and 3) What really is the technology impact given that if technology includes the application of new drugs and drug treatments like gene therapies?

So, while this may seem a bit like “go to sleep reading” the output tells us that if things don’t change, we’re heading over the crisis cliff in terms of affordability on both the employer and employee side. That is why market places like Wisconsin, which are so far behind in creative solutions, and risk management innovations, are heading toward, if not already over that cliff. Thus our WellBen Dynamic Medical Home model thinking, as well as all of our inputs as to innovation and changes in benefit risk management thinking, is not just to create a new benefit plan models, it's a necessary demand to change the direction we’re heading in.  We need not think about just slowing the train down, we need think, create, and innovate ways to halt it if we can.  This is why things like RBP, DPC, and unique network structure integration into WellBen are not “shiny” objects, they are more like wrenches that need to be used to tighten down the screws on the cost of health care thereby allowing a higher level of concentration on what matters-quality based care and the outcomes of the patient experience.

https://www.soa.org/globalassets/assets/files/resources/research-report/2019/2020-getzen-report-update.pdf

By the way, all of our consultants at the Starr Group have required goals not just in production but also in educational pursuits. They are all trained in underwriting, the elements of self-funding, and are continually trained and tested in problem solving thinking using their "underwriting-actuarial based thinking and logic". We also continually explore new ways to solve risk management issues in benefits as well as commercial insurance pursuits. We have our own trademarked programs for self-funded employers, i.e., Engage Cafe and WellBen Dynamic Medical Home. These programs are innovative approaches to use the full forces of choice, wellness initiative, and numbers based logic, to benefit risk management. We don't believe in product as much as we believe in analysis and using as much data as we can gather to examine, discover, and then build resolution strategy processes. Most employers in the Wisconsin marketplace have been product driven for the past two decades due to the collusion between carriers, large provider systems, networks and "brokers," whereby monetary performance has been placed at a higher threshold of achievement than risk management problem resolution, meaning money in their pockets rather than savings to the employer, and higher levels of care and access to plan participants.

At the Starr Group our business model focuses on risk management, discovery analytics, and recommendations, followed by effective strategies built to address the risk management problems. We don't sell product, we solve problems because we're in it for the long term. Our goal is to be business partners who are obligated to our clients "to do our jobs." And in so doing, we benefit from getting paid as well as formulating long term relationships.

Our vision is very much like all of those disruptive forces that have come before us, Amazon, Micro Soft, TESLA, because, quite frankly, we see and deliver a better way.

Thanks for reading-Greg