Ever wonder what insurance companies actually do with all the money your organization and employees pay in premiums?

A recent study sheds light on the subject – and reveals areas where money gets wasted.

A significant piece (about 10%) of your healthcare premiums get spent on “defensive medicine” treatments. These are treatments and tests that doctors order to reduce the risk of malpractice lawsuits – not because they are medically necessary. The study found hospital  outpatient departments and pediatric offices were among the biggest culprits for practicing defensive medicine.

For example,  a doctor may order a chest X-ray and urinalysis before minor surgery on a healthy adult.
Such tests drive up the cost of health claims, yet almost never have any medical benefit. In fact, they can even put people at risk.  Best practices to reduce the  cost effects on your company:

• choose plan designs that place strong emphasis on evidence-based medicine, and
• double up your company’s current educational efforts to teach employees how to ask their doctors questions about their own healthcare.

Mixed news on utilization

It’s not surprising the study finds increased utilization of medical services is one of the main reasons for continued premium increases.

What is surprising is how much of your premium money goes to “good” and “bad” utilization. Good utilization – things like routine physicals, yearly mammograms or colonoscopies – is on the upswing. Bad utilization (such as employees using emergency rooms for routine care) has dropped somewhat for many corporate plans, but still remains high.

The growth of good utilization is keeping pace with big-ticket, bad outcome treatments for late-stage chronic health problems tied to things like obesity and smoking.  That shows some employees are getting the message about the need for health-risk screenings.  Even so,  lifestyle issues alone contribute 3 cents per every dollar of increased premiums.