CEO Roundtable: Insurance

Springfield Business Journal Executive Editor Christine Temple sits down with Trevor Crist, CEO of Nixon & Lindstrom Insurance Inc.; Trevor Croley, president of Croley Insurance and Financial Inc.; and Richard Ollis, CEO of Ollis/Akers/Arney; to discuss a wide range of topics impacting the insurance industry.

An excerpt from the start of the podcast follows.

Christine Temple: I want to start with costs – that’s on a lot of employers’ minds right now as we’re in enrollment season. There was a study from Aon that the U.S. market would increase about 9%, the cost of employer-sponsor health care coverage in 2025, a little bit higher than what was expected this year. What are you all seeing?
Trevor Crist: That is pretty consistent. A lot of it depends on the carrier you’re with. Seems like the ones that are more aggressive one year may make up for a portion of that the following year, but I think that medical trend and just basic inflation affects everything, including the industry driving those rates in probably that we’ve seen 9% to 12% range.
Temple: What are some of the trends that are affecting costs?
Crist: Health care costs aren’t going down themselves, and they’re getting the same pressure from their providers as everyone else. The carriers will typically, specifically on small group, price based upon three buckets, one of them being medical trend: What is the additional cost of doing business? And then the other would be the risk of the group. If they have something specific going on that’s going to drive their specific risk either up or down – more traditionally up than down unfortunately. And then the last being demographic. Has the average age gone up or down? Used to be gender driven as well, but now more purely age driven.
Trevor Croley: I think more groups are getting a higher increase than about a 9%. Like Trevor had mentioned, probably closer to 12%. The trends with medical inflation have generally been really more around 11%, maybe even a little bit higher. I’m not too for sure that we’re not getting a little bit from the fallout from COVID. Certainly inflation, the cost of medical supplies, pharmaceuticals. All of that’s just gone out of control.
Richard Ollis: Medical inflation, typically, is far outpacing regular inflation. Obviously, we had a peak last year in regular inflation, but medical inflation is largely driven by claims and also medical costs. Specialty drugs are really having a significant impact on costs. Used to be 3% of a plan cost, now it’s upwards of 20% of plan cost. I’d be remiss if I didn’t mention that overall, when you look at Americans’ health, we are in poorer health today than we ever have been. I serve on the Wellness (Council) of America and, essentially, our health practices have diminished certainly over the past several decades and that’s having an impact on costs as well.
Temple: Curious on the types of prescription drugs that are impacting that. I read that the growth in weight loss drugs are having an impact – and the behavioral health drugs that more people are using.
Ollis: Absolutely. You brought up the weight loss drug. We used to manage that through diet and exercise. I’m not here to weigh in on people that have trouble with that, but what I am saying is that those drugs are costly and we’re using drugs in some cases in lieu of some basic health practices that we used to use.
Temple: Another big topic of conversation in the past few months has been the ongoing battle with a contract negotiation between Mercy and Anthem. There’s about half a million Missourians that use Mercy that have Anthem insurance, and as of now, about 45 days out, there’s no contract for the start of Jan. 1 to continue that coverage. What kind of impact has that had on your clients, how are you advising them and how do you think this is going to turn out?
Croley: It’s rough when this has played out so much in the media. The truth of the matter is, these contract negotiations, they go on all the time and we just don’t know it. You’ve got to look at this from both sides. I don’t think anybody would fault a provider or a person that wants more money for the services or goods that they have, but you also have to remember, and I don’t usually side on the side of all these insurance companies, we fight with them all the time, but the truth of the matter is, if they don’t manage that kind of thing, then we’re all paying more. A lot of our clients are just fed up with these rate increases. If the message is from one side, “Hey, just go out and find it with another insurance company.” Well, when the other insurance companies don’t provide a less expensive product than what they already have and we can’t move those people to accommodate that, they’re just going to go and find other providers. In this instance, yes, we will move some of that business away from Anthem if it doesn’t get resolved. We have a backup plan with other carriers. If you look at the United HealthCares, the Aetnas, they’re flooded with people wanting to potentially come on the plan, but everybody I think is kind of holding off to see where it goes. We’re also working directly with providers like Cox or Citizens Memorial to determine that when and/or if we can’t move a group or the group doesn’t want to move, what do we do with those people that need new providers? They’re eager to take on more people. It’s going to be a challenge to get them all in.
Crist: Unfortunately, in these scenarios, it’s the member and our employer groups that suffer. We know that the carrier and providers are working hard and certainly have expectations on them as well. At the end of the day, it’s a consumer who’s sitting back and wondering if they’re going to have the same product on Jan. 1 that they currently have. We’ve seen other providers negotiate through this in the past. In our area, they’ve always come to terms, sometimes at the last minute. There have been stories in other communities where that’s not the case and it is stressful. We have lots of clients reaching out to us asking what their options are. It wasn’t that long ago that Anthem members didn’t have access to Mercy in-network. A lot of the success of the Anthem/Missouri chamber (multiple employer welfare arrangement) program has driven a lot of people to that network. Even though we’re all hopeful they’ll come to terms, and most have in the past, we are starting to see some concessions offered by the carrier. Certain products will have extended deadlines when you have to let them know you’re going to make a change, and we’re starting to see some softening on those terms if for some reason they don’t come to some sort of an agreement by Jan. 1.
Ollis: They’re highly likely to come to a deal, 90% of the time they do. The challenge is as we approach, and both Trevor and Trevor mentioned this, groups are getting nervous, they’re considering other options in the marketplace. And the other unfortunate thing is as this plays out in the press and it gets ugly as far as their posturing, this does have a long-term impact on both Anthem and Mercy’s relationship. If you’re fighting it out in public instead of behind closed doors in these negotiations, that doesn’t necessarily bode well for your future relationship together.