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the challenge :: Holding down the rise in health care costs
The cause of rising health insurance premiums is the rising cost of health care itself. Nationally, about 87 cents of every dollar of private health insurance goes to health care products and services, and 13 cents to administration. More than half of each private health insurance dollar is spent on hospital care and physician services.
As this graph shows, health expenditures have risen from 7 percent of Gross Domestic Product (GDP) in 1970 to over 15 percent in 2004—during a period when GDP has grown more than any other time in our nation’s history. That figure is expected to reach 17 percent by 2010.
A combination of factors is driving health care costs higher. These include the increased cost and use of medical services, prescription drug use, expensive new technology, an aging population, legally mandated benefits, and medical malpractice insurance costs.
our part :: What we can do about rising health care premiums
WellPoint is taking action to stem the rise in health care premiums. We’re also helping consumers take more control of their own health care spending.
 Focusing on our own costs. In the past several years, we have significantly reduced administrative costs as a share of revenues. The merger of Anthem, Inc. and WellPoint Health Networks Inc. provides substantial opportunities for operating synergies and cost savings. Synergies are expected to be at least $250 million a year by 2006. Our merged company is also able to spread fixed administrative costs and overhead over a much larger membership base, helping to hold down premium increases for our members.
We’re also helping hold down the cost of prescription drugs through efficient pharmacy benefit management services. (Click here for more info.)
Helping contain the cost of care. One way to rein in health care costs is to improve quality—because quality care can actually cost less. The Institute of Medicine reported in 2000 that medical errors cost an estimated $38 billion annually. By collaborating with hospitals, physicians and other health care professionals to improve clinical performance, WellPoint is helping to reduce the costs that everyone must bear.
We’re also helping to reduce the cost of care through programs to assist members in managing chronic, and often serious, medical conditions. We provide coaches and other support to help these members stay healthier and avoid the need for hospitalization and other costly treatment.
Helping consumers manage their own costs. WellPoint is developing products that give consumers more choice and control over their expenses, and we’re helping them make informed decisions about their health care.
Our Anthem ByDesign HSA couples a high-deductible health plan with a Health Savings Account (HSA)—just one example of many HSA options offered by WellPoint companies. The high-deductible plan offers lower premiums, while the HSA provides members with a tax-free way to pay for expenses within the deductible while saving for future health costs.
We are also providing consumers with information that can help them make good choices and save money on health care—for example, by using more affordable generic drugs.
Our GenericSelect programs offer commercial members a discounted co-payment—in many cases $0—for their first generic prescription. Blue Cross Blue Shield of Missouri’s program offers free refills for up to six months. In California, GenericSelect has increased the use of generic drugs in the covered categories by nearly five percentage points in the past year.
The Think Generics program offers many Anthem Blue Cross and Blue Shield members an opportunity to try a complimentary sample of a new prescription for an eligible generic medication. Members who have continued to use the generic drug have saved an average of $26.86 per prescription.
WellPoint is also offering Medicare discount drug cards throughout each of our states. As of January 2005, we issued over 338,000 cards, making us one of the nation’s largest issuers.
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