Health Care premiums up 10-30% nationally next year.....
(but this is of course non-inflationary...since it's "reformed" health care, it must be better--and therefore hedonically cheaper! Q.E.D.!!)
nytimes.com
<<September 6, 2000
H.M.O. Costs Spur Employers to Shift Plans
By MILT FREUDENHEIM
Todd Buchanan for The New York Times
Liz Rossman said Sears was seeking options to H.M.O. coverage.
Health insurance premiums are increasing by 10 percent to 30 percent across the country, according to employers, insurers and regional business groups familiar with the rates being paid by dozens of companies. Driven largely by escalating drug costs, the double-digit increase in annual premiums is the third consecutive one for many companies.
The rising premiums suggest that apart from the most restrictive, bare-bones health maintenance organizations, managed care is no longer keeping medical costs down. The industry has also been consolidating recently, increasing profits, but weakening the ability of employers to bargain on rates.
Many of the companies facing steep premium increases today actively encouraged their employees to join managed-care plans in the past, even though some health care experts warned that managed-care plans would not control costs in the long run. Now those companies are starting to turn away from H.M.O.'s toward insurance that does not entail the high administrative costs of managed care.
The double-digit increases come at a time of rising concern in Washington and in the presidential campaign about health care costs, particularly for drugs in the Medicare program. Both Gov. George W. Bush, and Vice President Al Gore have proposed ways to add drug coverage for the elderly.
The effects of the increasing premiums are likely to ripple through the economy. In contrast to the 1970's, when companies were able to pass along higher health care costs in the form of higher prices, today's rising premiums will cut into many companies' profits by adding to their operating costs.
Many technology companies, facing particularly fierce competition for workers, are among those absorbing the higher premiums. Higher rates would be "as unaffordable for employees as they are for the company," said Kathy Reinhardt, benefits director of Analog Devices, a chip manufacturer based in Norwood, Mass. "Fortunately, we can do it this year. It is real important that we continue to be able to attract and retain key employees."
But other employers, particularly smaller companies in low-margin businesses, may force their employees to swallow the increasing costs, or even stop offering health insurance altogether. In a survey of 506 small businesses released yesterday by the National Blue Cross and Blue Shield Association and the Employee Benefits Research Institute, one in seven businesses with fewer than 100 employees said they would drop health insurance if their premiums increased by 10 percent.
Even when companies continue to offer health insurance, some workers facing higher premiums may decide to drop their coverage and join the 45 million Americans without insurance. Individuals who buy their own insurance are likely to be hit hard as well.
Many large employers are frustrated by the costs of the elaborate central administrative systems of many H.M.O.'s, and by the need to pay in advance for all their employees to be covered. Big companies are also de-emphasizing more flexible managed-care plans, known as point- of-service plans, that let employees visit doctors outside their H.M.O. network if they are willing to shoulder more costs.
Instead, companies are stepping up efforts to shift employees into preferred-provider organizations, plans that are much closer to old- fashioned fee-for-service insurance.
Preferred-provider organizations, or P.P.O.'s, are based on networks of doctors and hospitals that agree to reduced rates for their services. Employees can go to any doctor in the network without obtaining permission beforehand, and employers pay only when their workers use medical services. There were 89 million people in P.P.O's and 81.3 million in H.M.O.'s in July 1999, the latest count, according to the American Association of Health Plans, a managed-care industry group.
Sears, Roebuck is one company making P.P.O.'s more appealing. It is cutting P.P.O. deductibles by half to attract employees away from H.M.O.'s, said Liz Rossman, vice president for benefits at Sears. The company is also dropping about 30 of the 180 H.M.O.'s that it offered employees this year. About 87 percent of Sears employees are currently enrolled in H.M.O.'s.
Andersen Consulting said it was substituting a national P.P.O. from United Healthcare and a Blue Cross and Blue Shield network to replace 125 H.M.O.'s and a point-of-service plan. Geoff Kantor, head of benefits at Andersen, said the company expected "to use our money more effectively" with the change. He said the P.P.O. would also be more convenient for Andersen's 30,000 employees, who frequently travel far from their hometown H.M.O.'s.
Costly new drugs and rising prescription volumes account for much of the premium increases. At General Motors, for example, spending on drugs increased 20 percent last year, to $762 million, in its self-insured plans, and the company expects its pharmacy costs to continue rising at that rate, said Bruce Bradley, director of managed-care plans at G.M.
In addition to rising drug costs, insurers say that greater demand for other medical services, increasing hospital and physician fees and uncertainty about new laws regulating health care are all forcing them to raise rates, and making it impossible for them to commit themselves to premium rates for more than a year.
David Snow, executive vice president of Empire Blue Cross and Blue Shield, said heavy investments in new technology and higher salaries to retain skilled employees were also adding to costs.
At the same time, however, profits of managed-care companies are rising slightly after losses in the mid- 1990's, and a wave of insurance company mergers has reduced competition in many markets.
Several large employers said that 2001 would be the second consecutive year of double-digit increases in health care premiums. For many smaller companies, which generally face steeper rate increases, 2001 will bring their third annual increase of more than 10 percent.
This year, the employer's share of health benefits averages $4,911 for each employee with a family, according to John Cookson, a principal at Milliman & Robertson, an actuarial firm.
Health costs are "out of control," said Elyse Hanan, executive producer of Zap Edit, a film editing company with eight employees in Manhattan that absorbed double-digit premium increases in 1999 and this year. "I like the plan that I have, but it's a ridiculous amount of money," she said. If there is a third big increase next January, she added half- seriously, "the only doctor I'm going to be able to afford is my brother."
The Alltel Corporation, a wireless phone company with 26,000 employees, is absorbing most, but not all, of its premium increases. It is raising the employee payment for a visit to a doctor's office to a $20 maximum from $15, and adding a partial payment each time an employee checks into a hospital.
Joe Meyer, manager of corporate benefits planning at Alltel, said he had persuaded its H.M.O.'s to shave a few percentage points from the proposed increases, cutting the average increases to 15 percent from 17 percent. But he said many H.M.O.'s were reluctant to bargain. "They have a `take it or leave it' attitude," he said.
The premium increases are not limited to a particular region. The nation's second-largest employee benefits provider, the California Public Employees Retirement System, said the rates its million members and their families would pay for basic H.M.O.'s with limited service options were rising 9.2 percent, while rates for preferred-provider groups were increasing 18.8 percent, and for Medicare H.M.O.'s, 31.7 percent.
Small and midsize employers face even steeper increases. In the Northwest, for example, their premiums will rise 15 to 30 percent next year, said Richard L. Woolworth, chief executive of the Regence Blue Cross and Blue Shield group in Oregon, Washington State, Idaho and Utah.
Premiums will rise 18 to 20 percent in Texas, 10 to 15 percent in St. Louis and close to 10 percent in New York for most large employers, and 14.5 percent for state employees in Massachusetts.
Larry Boress, executive director of the Chicago Business Group on Health, an employer group, said many employees had singled out point-of-service plans as a problem. One in six insured employees were in these plans last year, according to a survey by the William M. Mercer consulting firm. And employers called the plans "very expensive," Mr. Boress said.
Gail Marcus, a senior vice president of Cigna HealthCare, said that its 4.8 million-member P.P.O. was growing twice as fast as its H.M.O.'s and its point-of-service plans. But she said Cigna had not seen customers switching to preferred provider from other types of plans.
Oxford Health Plans still has 77 percent of its 1.45 million members in point-of-service hybrids, said Maria Shydlo, a spokeswoman for Oxford. Jill Griffiths, a spokeswoman for Aetna U.S. Healthcare, said the company was adding flexible options to give members more choices. She said Aetna would be raising premium rates 13 percent next January.>> |
