By David Rosenberg, Vice President, Finance

New Jersey has the fifth highest per-person health care spending in the United States – about $6,200 per person. That’s almost $25,000 for a family of four. And higher prices – particularly for prescription drugs – but also for doctor visits, testing, and medical procedures are the biggest reason that we’re paying more. It’s not that we’re sicker or using more health care services, it’s that paying a higher price for those services.

Horizon’s 3.8 million members trust us to wisely manage their health insurance premiums. So where does all that money go? You might be surprised.

In 2017, 89 cents of every premium dollar went directly to pay for our members’ medical care.

Here’s a breakdown of how each of those 89 cents were spent:

Physician services (31 cents). These include all fees paid to doctors for a wide range of health care services. A few of the many are annual check-ups, preventive care (mammograms, cancer screenings, blood tests, etc.), surgery and recovery care and much more.

Outpatient costs (21 cents). From in-home nursing visits to post-operative evaluations, treating bone fractures to physical therapy, these costs were incurred for care at outpatient facilities (those that don’t involve an overnight stay). According to the New Jersey Health Care Quality Institute, outpatient spending in New Jersey – across all health care providers – rose higher than the national average.

Prescription drugs (20 cents). One of the fastest rising and most debated health care expenses, controlling prescription drug costs is a challenge for everyone involved in health care as they are rising faster than any other part of health spending.

Inpatient costs (17 cents). Hospital stays generate a myriad of expenses, and often include charges for surgeons and other specialists, nursing and a wide range of other hospital fees. These costs can be quite high for lengthy stays due to acute emergencies or chronic illnesses.

What about other expenses?

After covering our members’ care needs, we were left with 11 cents out of every dollar collected. Here’s where we applied the money—and why.

Premium taxes, Affordable Care Act (ACA) fees and other taxes (3 cents). Horizon is a not-for-profit company, but we still pay plenty of federal and state taxes. In 2017, we paid about $363 million in fees and taxes.

Administrative services (6 cents). Like every business, large and small, we incur expenses running the company – salaries, phone and electric bills, printing costs, advertising, accounting, information technology and other operating costs connected with the routine functions needed to manage the health care of nearly 4 million people.

Insurance Brokers and Consultants (2 cents). Many people and businesses use a broker or consultant to help them make the right choices about their health insurance. They play an important role making sure that business owners and their employees understand their plans and how to use them to get the care they need. Brokers are paid through commissions on the policies they sell.

What about Horizon’s profits? There aren’t any.

Finally, after all of these expenses, what remains of each dollar collected is … less than a penny.

In fact, only 0.6 percent of our revenue stays with Horizon. As a not-for-profit company, we have no shareholders or investors, so any income remaining after we’ve paid all the claims and bills goes into a reserve fund that protects our members.

New Jersey, like most states, requires a minimum level of capital reserves for a health insurer to operate in the state. These reserves are there to pay claims or other expenses when the unexpected happens. Reserves enable insurers to continue paying doctors or pharmacies during a natural disaster like a hurricane or cover unexpected costs if a public health crisis like a massive flu outbreak occurs. It’s one more way we give our members peace of mind.

Working Together to Control Costs

Horizon is working with doctors, pharmacists, and hospitals to change the way we pay for your health care to get costs under control. We’re leading the effort to move from a system that paid health providers for the number of services they deliver to instead pay them for better results. To give people the health care they need at a cost they can afford, we’re shifting the focus to delivering better care, not just more care. It’s called value-based care and it’s something you’ll be hearing a lot more about.

Value-based payment models are the best way to align incentives to reward quality, reduce cost and improve the patient experience. Horizon began collaborating with like-minded doctors and hospitals to develop and evolve value-based payment models starting with patient-centered medical homes more than ten years ago.

Today, we have multiple value-based programs that will meet a provider wherever they are in their journey to value. More than 1.6 million of our members are getting care from a doctor who participates in one or more of our value-based payment programs and the results continue to demonstrate better outcomes and lower total costs.

Better care, lower costs, and an improved health care experience for our members. That’s Horizon’s focus.

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