Business: Experts predict slowing economy will lead to hike in health insurance rates
Copyright © 2001 Nando Media
Copyright © 2001 Scripps Howard News Service
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By JEAN P. FISHER, Raleigh News & Observer
(August 21, 2001 12:57 p.m. EDT) - Health insurance companies are delivering a killer shock for employers and their workers: the biggest rate increases in more than a decade.
With layoffs and unemployment on the rise, employers will be more willing to shift costs to employees. And fear for job security is spreading, leaving workers with little choice but to accept the higher premiums.
Analysts who track the costs of health benefits are predicting average rates will jump by as much as 20 percent nationally, a figure that harks back to the 1980s and the days of skyrocketing medical costs that preceded the introduction of cost-saving HMOs. Adding to the hurt: Next year's expected increase comes after rate increases in the low teens for 2001 contracts.
"Rates have been rising for about the last three years, but we were enjoying a robust economy and a robust stock market, and employers were more willing to absorb the cost," said Steve Graybill of the benefits firm William M. Mercer in Charlotte, N.C. "This year, everyone is feeling squeezed, and I think we're going to see employers passing more costs on than ever before."
Rates are increasing rapidly because medical costs are also soaring, health insurers say. Prescription drugs cost more. Medical office visits are up. And those trends are likely to continue, thanks to health plans that no longer require enrollees to get referrals for specialty care, industry representatives say.
"The industry has taken a turn in giving people what they want," said Susanne Powell of Blue Cross Blue Shield of North Carolina. "They want more choice, they want more flexibility, they want plans that are easier to use. That does not come without some cost."
Some industry watchers say the sharp increases may also be the result of a natural market shakeout. In the 1980s and early 1990s, health insurers entered the national and local markets with low rates to attract members. Competition among plans kept a lid on premiums through the middle 1990s.
"Some plans really under priced the market and found they couldn't sustain it, and then we started to see consolidation," Graybill said. "What's happened is that the strong got stronger and the weak got weaker."
Rates began to creep up in 1998 and, last year, rate increases hit double digits for the first time in more than a decade.
"People were sort of lulled through the 1990s because of low rates," said Larry Levitt of the Kaiser Family Foundation in California, which closely tracks shifts in health insurance coverage.
"The alarm clock has gone off, and there still aren't any obvious solutions. Employers used to turn to managed care to control costs; now there's no relief anywhere," Levitt said. |
