A new analysis of recently published insurance data found Indiana's medical claims costs (spending on hospitals, physicians, and other medical providers) in line with neighboring states. The report, authored by Kaufman Strategic Advisors, analyzed publicly available data on insurance premiums and claims costs for fully insured plans from 2015 through 2020 to understand the critical drivers of premium increases for Hoosier employers and consumers.
According to the report, medical claims costs in Indiana were roughly equal to or below those in Illinois and Ohio from 2015 to 2020. In addition, the growth rate in medical claims costs over the six-year period was slower in Indiana than in Illinois and Ohio.
The analysis also found that the growth rate in average premiums over the six-year period for the fully insured health plans in Indiana, Illinois, and Ohio rose at significantly faster rates than incurred medical claims, contributing to the profitability of fully insured health plans in those states. Gross prescription drug claims, which determine the cost of patient copayments, grew faster in Indiana than the other three states, according to the report. In addition, the analysis identified health care administrative costs and pharmacy costs as the main driver of health care cost inflation to Hoosier employers.
“The data reveals that Indiana is far from the high-cost outlier for medical services that some have portrayed it as," said Nate Kaufman, managing director of Kaufman Strategic Advisors. “For fully insured plans, insurance companies in Indiana raised premiums faster than total claims costs, which resulted in higher profits, not lower premiums. Also, since patients' deductibles and copayments for drugs are based on gross drug costs which nearly doubled in fully insured plans in Indiana from 2015-2020, patients paid more out-of-pocket while health plans benefited from ever-increasing rebates from pharmaceutical manufacturers."
From 2015 to 2020, medical claims costs on a per member per month (PMPM) basis for fully insured plans in Indiana increased 20%. During this same period, health plan administrative costs and profits PMPM increased by 73% and gross prescription drug costs PMPM increased by 90%. Prescription drug rebates retained by the health plans increased by more than 200% during this time.
The report also found that Michigan had lower medical claims costs and gross and net prescription drug costs than its three neighboring states. Unlike Michigan, for-profit health insurance companies comprise a significant share of the fully insured markets in Indiana, Ohio, and Illinois.
“One likely reason for Michigan being a low-cost outlier compared to its three nearby states is the nature of its insurance market," said Kaufman. “The dominant health plan in Michigan is Blue Cross Blue Shield, a not-for-profit health plan known for its collaborative relationship with hospitals and other providers that successfully balances healthcare affordability with quality and sustainable access for Michiganders."
“This analysis demonstrates that rankings by unit price and comparisons to government-set rates like Medicare do not accurately reflect the total cost of care in Indiana," said Brian Tabor, president of the Indiana Hospital Association. “Policymakers must look at all components of the health care dollar, and we're pleased to see legislation this session focused on insurer transparency to ensure employers and all Hoosiers better understand why their premiums have increased."
Senate Bill 249, authored by Sen. Liz Brown (R-Fort Wayne), would require insurance companies to submit written justification to the Indiana Department of Insurance (IDOI) for review and approval if the premium for a health insurance policy is expected to increase 5% or greater compared to the previous year. In addition, the bill would shorten the time in which an insurer must respond to a request for prior authorization, from 72 hours to 24 hours for urgent procedures, and from seven days to two days for non-urgent procedures. It would also require health plans to post on their websites every year the 30 most frequently submitted medical billing codes for the previous year and the percentage that were approved.
IHA and other provider organizations testified in support of the bill, saying it would increase transparency in the health insurance industry, remove barriers, and speed up the health care delivery process to make care more accessible to patients. The bill passed out of the Senate Health and Provider Services Committee on Jan. 26 by a vote of 10-1.
The same day the bill was heard in committee, Anthem publicly reported $1.1 billion in profit for Q4 2020, doubling its profits year-over-year.