This last year has been a constant “buzz” of preparation leading up to the NC Association of Health Underwriters annual symposium. Every year the President-Elect of this association is responsible for managing, overseeing, coordinating and soliciting carriers for this once of year member event. And this year, I was the lucky recipient of this honor. This year’s event was the 32nd time this North Carolina chapter has held such an event. There are many issues facing healthcare professionals in our state and there are many more new and emergent idea’s and technologies that are changing the shape and way we do business. Highlighting both these challenges and opportunities was the focus of this years event.
Breakout sessions including topics around the importance of leadership, marketing, cybersecurity, Medicare, PBM’s and information on where the market is headed from Aetna and UHC. While there was much to take-away I wanted to share with you an update from UHC’s CEO of the Carolinas, Garland Scott, who spoke about the stand-off between them and WakeMed.
UHC and WakeMed have been at loggerheads for over four months with a standoff that effects many of our clients and their employees. Until a such time that a new contract is agreed upon and signed, WakeMed will be an out-of-network provider to UHC policyholders. During the carrier roundtable Mr. Scott, addressed this concern and was candid about the challenges to facing the negotiations between the hospital and the carrier. Mr. Scott expressed openness to continuing the negotiations but admitted he didn’t see an immediate solution in the forecast.
Payer/Provider standoff’s in this moment of national inflation very well may become more frequent. In addition to inflation, hospitals in North Carolina and around the country are facing enormous labor shortages compounded by the pandemic. Inflation and labor shortages contribute to an increase in the cost of material and labor expenses. Providers are now looking more closely at their contracts with payers in an effort to increase overall reimbursement rates for services. The American Hospital Association recently released a report detailing policies that “add billions of dollars in added unnecessary administrative costs to the healthcare system while compromising patient care”.
For their part, payers are generally trying to strike a tone of equanimity and cooperativeness. In a June investors call UnitedHealth Group’s CEO Andrew Whitty, said that payers will be “very, very respectful of the kind of underlying phenomena (facing providers) withing the cost trends of the environment.” Hospitals have interpreted this as an opening to peruse aggressive carrier contracts. HCA Healthcare’s CEO Sam Hazen told investors that they have already seen “some early success and recognition by the payers” and that some of its recently renegotiated contracts reflected higher price escalations than those of the past. I think it’s reasonable to assume that we were in 3.5% to 4% zone previously with our commercial pricing,” he told investors. “We’re in a competitive positioning as a company globally and that allows us to negotiate based upon the inflationary pressures. … I believe our relationships will allow us to get to a number that makes sense for both organizations, but I do anticipate it being somewhere around the mid-single-digits.”
Overall, “mid-single-digits” was what was echoed by Aetna, also a participant on the panel with both agreeing with a 3.5-5% increase in costs. This is, in part, what makes up the increase in “benefit trend” that we so often discuss with our clients when negotiating renewals. In August Mercer released a report signaling that overall benefit costs would accelerate to 5.6% in 2023. It’s looking more and more like Mercer, this year, very well may be correct. If payers and providers continue on a path of contentious contract renewals 2023 is going to be a costly and bumpy ride for employers renewing their medical plans.
