Rising Costs Threaten Access to Care
Factors That Contribute to the Rising Costs of Health Care
Double-Digit Provider Rate Increase Requests
Like many other health plans nationwide, we are facing difficult discussions with providers about their unreasonable requests for high reimbursement rates, with many of these providers threatening to go out of network. As New Jersey’s largest health insurer, we are committed to working with doctors and hospitals to make sure that cost is not a barrier to our members getting the care they need.
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Medical merger illustration.
Mergers and partnerships between medical providers, as well as the acquisition of physician practices by private equity firms, are reducing individual market competitiveness, allowing providers to drive up their prices unopposed and control much of a geographic market and specialty.
Hospital Upcharging
Studies show that some hospitals increase charges by as much as 18 times over their costs, and these charges have increased substantially over the past several years.
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U.S. Hospitals’ Average Charge-to-Cost Ratio, 2014 - 2018
417%
408%
395%
382%
369%
2014
2015
2016
2017
2018
Source: nationalnurseunited.org
Increasing Rx Costs
Prescription drugs represent more than 22 cents of every $1 spent on health care in the U.S.1 Unfortunately, prescription drug costs are expected to continue to increase year-over-year by as much
as 8%.2
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One in three U.S. adults are unable to afford taking their medicine as prescribed.1 Here are some other reasons why:
Increased demand – Costs are driven by dramatic increases in prescription drug use, which is partly attributable to the number of patients with chronic health conditions. Today, more than 60% of U.S. adults have at least one chronic condition that requires prescription drugs, while four in 10 adults in the US. have two or more.2
Specialty drugs – These high-cost drugs that are used to treat rare, complex and chronic health conditions continue to be a significant driver of health care costs. While they represent less than 2 percent of all drugs being prescribed, they are more than 50 percent of the total spend for prescription drugs.3
Lack of competition – Prices have increased for even widely used, older, generic drugs.
Lack of governance – The average prices for prescription drugs are driven by demand, and have, at times, increased at a rate higher than U.S. inflation.
Avoidable ER Usage and Out-of-Network Care
The increasing frequency and costs of avoidable Emergency Room visits, as well as the costs associated with out-of-network (OON) care, are also significant drivers of overall health care costs.
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An avoidable hospital ER visit is a trip that is not an actual emergency, and is for a condition that could have been treated in a primary care or urgent care center setting. This includes common primary care treatable conditions such as:
- Bronchitis
- Cough
- Dizziness
- Flu
- Mild headache
- Low back pain
- Nausea
- Sore throat
- Strep throat
- Upper respiratory infection
The average cost for an avoidable ER visit is 12 times higher than for the same care at a doctor’s office and 10 times higher than at an urgent care center.1
Avoidable ER visit cost
$2,715*
Cost for same care in urgent care setting
$271
Cost for same care in primary care setting
$217
Hospital facility fees increase the cost of an average ER visit by more than $1,000 over the same care in a doctor’s office, while lab, pathology and radiology services are 10 times more costly than when performed at a doctor’s office.
In addition to avoidable ER usage, patients choosing to use OON care also drives up health care costs. OON costs add up quickly, even for routine care, and if you have a serious illness or injury, it can mean paying thousands of dollars more.
For example:
You choose an OON doctor for a surgery
Doctor charges $30,000
Your plan covers $20,000
Doctor bills you for the $10,000 difference
You choose an in-network doctor for a surgery
Doctor charges $30,000
Your plan will cover $20,000, the contracted rate
Doctor is not allowed to bill you the difference
*For illustrative purposes only
You may also see a significant increase in your cost sharing (e.g., deductible, copay and/or coinsurance) when you use OON providers.
Lack of Access to Quality Care
Health care disparities, or differences in preventable health care burdens based on race, socio-economic status and where someone lives, can be a major cause of unnecessary health care spending.
Click here for more information on how Horizon is addressing health care disparities.
The Cost of Doing Nothing is High
Health disparities in the U.S. are projected to cost us $230 billion by 2050*, due to $150 billion in excess costs and $80 billion in lost productivity.
Health Equity: A Shared Responsibility
It's up to all of us to address social factors that affect health equity. Everyone deserves a fair opportunity to get care.
As part of Our Pledge, Horizon is focused on:
- Prioritizing access to care for key diseases identified by the Healthy New Jersey State Health Improvement Plan. These include, among others:
- Asthma
- Diabetes
- Cancer
- Offering training for clinicians on cultural competency, health literacy and implicit bias.
- Educating employees on Diversity, Equity and Inclusion (DEI).
- Reducing unnecessary Emergency Room usage and promoting the use of alternative settings like primary, virtual, urgent and ambulatory care.
- Coordinating with community partners to offer resources and support throughout
New Jersey.
*Source: W.K. Kellogg Foundation
State and Federal Requirements
Health insurance is among the most heavily regulated industries, and many state and federal requirements drive up health care costs, particularly in New Jersey.
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New Jersey has 35 mandates for treatment and services.
Source: Nj.Gov/dobi
State and federal regulation is largely intended to ensure that patients receive safe, high-quality care. However, clinical staff — doctors, nurses and caregivers — often find themselves devoting more time to regulatory compliance, taking them away from patient care. Some of these rules do not improve care, yet can significantly raise costs.
New Jersey was the third most heavily regulated state in America in 2022, with the number of regulations increasing by about 2% from 2019.1
629
Health systems, hospitals and post-acute care (PAC) providers must comply with 629 discrete federal regulatory requirements across nine domains.
Source: AHA.org
$7.6 million
An average-sized community hospital with about 160 beds spends this annually on administrative activities to support compliance with federal regulations – and that figure rises to $9 million for those hospitals with PAC beds.
$38.6 billion
The average national spend to comply with the administrative aspects of regulatory compliance. That means that the federal regulatory burden costs $1,200 every time a patient is admitted to
a hospital.
59 FTEs
The amount
of full-time employees an average-sized hospital dedicates to regulatory compliance, with over one quarter of these FTEs being doctors and nurses.
The timing and pace of regulatory change can also contribute to rising costs. Change often results in the duplication of efforts and substantial amounts of clinician time away from patient care to decipher the regulations and then redesign, test, implement and communicate new processes throughout the organization.
All of these state and federal requirements contribute to New Jersey ranking 31st in the nation in the cost of health care.
Is the average annual premium for employees in New Jersey with single coverage through employer-sponsored health insurance.
$1,758.67
Is the average annual deductible for employees in New Jersey with single coverage through employer-sponsored health insurance.
$1,744.67
Source: Forbes.com
51% of working-age Americans struggle to afford their health care and about one in three (32%) are saddled with medical debt.
Source: commonwealthfund.org
We understand how challenging managing rising health care costs can be for you and your family. That’s why, as New Jersey's largest health insurer, we are committed to addressing those challenges, and ensuring that quality health care remains accessible to all.
Click each box below to learn more.
Rising U.S. Health Care Costs
The Importance of Having Coverage
Why We Must Act Now
Addressing Rising Costs
It’s no secret that as inflation goes up, so does the cost of everything – including health care. According to the Centers for Medicare & Medicaid Services, health care costs topped $4.5 trillion in 2022, a 4.1% increase from the prior year. Hospital services (30%), doctor visits (20%) and prescription drugs (9%) accounted for the majority of this spending.
Unfortunately, these increases aren’t sustainable and ultimately fall on our members to pay.
Average Annual Premium for Single and Family Coverage, 1999-2023
Single Coverage
Family Coverage
1999
2001
2008
2013
2018
2022
2023
Source: Kff.org
Rising U.S. Health Care Costs
Rising U.S. Health Care Costs
The Importance of Having Coverage
Why We Must Act Now
Addressing Rising Costs
Simply put, if you're paying for every medical service yourself, you may make some health care decisions based on money instead of what's best for your health. This can limit your options for care and quickly translate into medical debt, more sickness and higher costs.
Nobody plans to get sick or hurt, but bad things happen – even to healthy people. Some things to consider when you don’t have health insurance include:
- A broken leg can cost you $7,500 to treat.
- Three days in the hospital can cost more than $30,000.
- Comprehensive cancer care generally costs hundreds of thousands of dollars.
- Uninsured patients have the least negotiating power when hit with a full charge for medical services.
- Uninsured patients are less likely than those with insurance to receive preventive care and services for major health conditions and chronic diseases.
- Most insurance plans provide prescription drug coverage (critical in the care and management of chronic conditions and illnesses).
Unfortunately, despite recognizing the value of having health insurance, due to the growing costs of health care in New Jersey, a significant number of residents had to go without care and/or ration their medicine in 2022.
The graph shows the percentage of New Jersey residents, by age, who went without care and who rationed medicine due to cost in 2022. It shows how 60 percent of residents ages 18 to 24 went without care, and 29 percent of those members rationed their medicine due to cost, while 61 percent of residents ages 25-34 went without care, and 30 percent of those residents rationed care. For residents ages 35-44, 59 percent went without care, and 33 percent rationed medicine, while for residents ages 45-54, 50 percent went without care, and 22 percent rationed medicine. Twenty-eight percent of residents ages 55-64 went without care, and 11 percent rationed care, while among residents ages 65 and over, 29 percent went without care and 10 percent rationed medicine.
Percentage Who Went Without Care or Rationed Medicine Due to Cost in Prior 12 Months, by Age Group
100%
80%
60%
40%
20%
0
WENT WITHOUT CARE
RATIONED MEDICINE
61%
25-34
60%
18-24
59%
35-44
50%
45-54
33%
35-44
30%
25-34
29%
65+
29%
18-24
28%
55-64
22%
45-54
11%
55-64
10%
65+
Source: Altarum Healthcare
The Importance of Having Coverage
Why We Must Act Now
Rising U.S. Health Care Costs
The Importance of Having Coverage
Why We Must Act Now
Addressing Rising Costs
Americans understand that health care is valuable and are increasingly concerned with the affordability of health care services and coverage.
In fact, among those who report difficulty affording monthly bills, about 74% of people polled are more likely to worry about affording health care over other routine expenses.
This graph shows how among those Americans who report difficulty affording monthly bills, most people polled are more likely to worry about affording health care over other routine expenses. Seventy-four percent of those polled worry about unexpected medical bills, while 73 percent worry about the costs of health care services. Other expenses they’re concerned with include gasoline and other transportation costs (65 percent), their monthly utilities like electricity (64 percent), food (62 percent), paying down debt (61 percent), their rent or mortgage (58 percent), their prescription drug costs (55 percent) and their monthly health insurance premium (48 percent).
Unexpected medical bills
74%
The cost of health care services
73%
Gasoline or other transportation costs
65%
Monthly utilities like electricity
64%
Food
62%
Paying down debt
61%
Rent or mortgage
58%
Prescription drug costs
55%
Monthly health insurance premium
48%
In addition, studies found that major health care issues that people are concerned with include:
- Abortion
- Pricey prescriptions
- Cost of coverage
- Medicare/Medicaid entitlements
- Addiction crisis
Most important factors for people when selecting coverage –
- Network size
- Out-of-pocket costs
- Premium costs
Source: KFF.org
Addressing Rising Costs
Rising U.S. Health Care Costs
The Importance of Having Coverage
Why We Must Act Now
Addressing Rising Costs
We are working with our network providers and other partners to address the rising costs of health care. This requires:
Making sure everyone does their part to find collaborative, strategic solutions that address rising costs.
Looking in the mirror – reducing our operating costs (where possible) without sacrificing the quality of care and services our members receive. While still achieving the highest customer satisfaction ratings of any health insurer in New Jersey, we have worked hard to improve the cost of our own operations, saving
$122 million last year with an expected $75 million in additional savings over the next year.
Encouraging patient-centered care – One way we reduce costs is by reimbursing doctors and hospitals based on the results they deliver for our members. Rather than paying them to deliver more care, we are incentivizing them to deliver better care. That change alone saved our members nearly $250 million in 2022. And a study showed that 64% of people polled like the idea of patient-centered, pay-for-performance care.1
Identifying opportunities to lower our members’ out-of-pocket costs (through innovative programs, care coordination, outreach, etc.).
Nearly 90¢ of Every Horizon Premium Dollar Goes Directly to Pay for Medical Care
27¢
PHYSICIAN SERVICES
22¢
OUTPATIENT COSTS
21¢
PRESCRIPTION DRUGS
18¢
INPATIENT COSTS
7.3¢
ADMINSTRATIVE
SERVICES
4¢
PREMIUM TAX, ACA FEES AND OTHER TAXES
0.7¢
Horizon Reserves
Approximately 90 percent of your health plan premium goes directly to pay for medical care such as doctor visits, hospital stays, prescription drugs and outpatient services. The remaining money is used to pay for things like taxes, government fees, administrative costs and broker commissions, and establish Horizon’s reserves. Horizon reserves are used to protect our members and ensure that there are sufficient funds to pay claims in the event of a natural disaster or public health emergency.
Information based on Horizon BCBSNJ insured markets (2023 data).
What Horizon is Doing
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Negotiating/Renegotiating Provider/Hospital Contracts
Negotiating/Renegotiating Provider/Hospital Contracts
Member Education
Addressing Rising Pharmacy Costs
Encouraging Coordinated Care
We expect to face difficult decisions when it comes to hospital and doctor reimbursement rates, but will continue to negotiate contracts that include rates that protect you from unreasonable cost increases. We’re committed to making sure that cost is not a barrier to you getting the care you need by:
Continuing to expand the state’s largest networks.
With 8,500 more doctors, specialists and other health care professionals in our networks — a 13.5% increase from 2022 — Horizon members now have more than 72,000 options for in-network care.
Encouraging our network providers to deliver quality, appropriate care.
We're eliminating wasteful care that doesn’t deliver good results, controlling administrative costs and working to keep price increases down.
Reimbursing doctors and hospitals based on the results they deliver for our members.
We do this by incentivizing them to deliver better care (these efforts saved our members nearly $250 million in 2022).
Seeing Results.
In 2024, we successfully negotiated new agreements covering 33 hospitals, 60 professional groups and 22 ancillary facilities.
Member Education
Negotiating/Renegotiating Provider/Hospital Contracts
Member Education
Addressing Rising Pharmacy Costs
Encouraging Coordinated Care
We offer programs and resources to help you get the information you need to access quality care while managing your out-of-pocket costs.
Visit our Education Center to learn more about:
- Plan options that best meet your needs
- Understanding your OOP costs
- Knowing your care options (telemedicine, urgent care, retail health centers, at-home care, etc.)
- Minimizing unnecessary medical care
- Our cost transparency tools (e.g., Treatment Cost Estimator)
- Our care management programs
Negotiating/Renegotiating Provider/Hospital Contracts
Member Education
Addressing Rising Pharmacy Costs
Encouraging Coordinated Care
We manage more than $5 billion in annual drug spend for 3.3 million members. We’re constantly looking for ways to manage pharmacy-related costs through programs that:
- Encourage the use of generic drugs – Research shows that using generic drugs can save consumers between 30 to 80 percent over brand name drugs.1
- Find lower-cost options that are just as effective – Rx Savings Solutions is a vendor that identifies eligible members, and provides lower-cost prescription drug options for them (from January 2022 to May 2024, this saved members more than $5.5 million).
- Increase convenience of access to care – Make it possible for members to get certain injectable medicines at their doctor’s office or in their home at a lower cost.
- Offer home delivery of medicines – For many members, home delivery offers 90-day supplies of medicines at one copay, delivered to their homes at no additional cost.
- Support Medicine Adherence – Provide outreach to help to make sure medicines are taken correctly. These strategies include providing special pill boxes, reminder packaging and nurse coaching.
We are currently engaged with 18 health systems that include onsite pharmacists to drive outcomes and strategy. This collaboration resulted in more than 1,000 pharmacy gaps closed in 2023, which yielded $3.1 million in annual savings that can eventually be passed on to members in the form of lower premiums.
1 nih.gov
Addressing Rising Pharmacy Costs
Encouraging Coordinated Care
Negotiating/Renegotiating Provider/Hospital Contracts
Member Education
Addressing Rising Pharmacy Costs
Encouraging Coordinated Care
We want you to get the most out of your health care coverage, and have a number of important initiatives and programs designed to help you:
- Understand the importance of having a primary doctor.
- Explore your additional site-of-care options.
- Take advantage of what our patient-centered programs have to offer.
- Achieve better health by using your behavioral health coverage.
- Enroll in case management/chronic care programs, if appropriate.
- Get wellness discounts that can help you stay active, while saving money at popular retailers and companies nationwide.
- Overcome any Diversity, Equity and Inclusion barriers you face through efforts and outreach to help bring health care to underserved communities.