Monday, May 07, 2001
Health-care benefit costs accelerating
By Tim Bonfield
The Cincinnati Enquirer
Employers are bracing for another round of double-digit increases in health-benefit costs for 2002.
Premiums could rise by 12 to 16 percent, according to a national health-care consulting company and two of the Tristate's largest health insurers.
If the predictions hold up, 2002 would be the third straight year of double-digit health-benefit increases in Cincinnati. But unlike past years when the economy was hot, this increase comes when many employers are reporting weak earnings and announcing job cuts.
Chuck Slater, general manager for Ohio for Anthem Blue Cross and Blue Shield, predicted that the increases may even go beyond 2002.
For the next one, two or three years, we see no way around increases of 12 to 16 percent, Mr. Slater said.
That means more small businesses struggling to continue offering health-care coverage. And more large employers passing the increased costs onto employees.
Several trends are contributing, said Mike Jost, health-care consultant with Chicago-based Hewitt Associates.
The population is aging. Employers with older workers are paying more for increased use of medications and medical services.
New drugs are getting more expensive. As pharmaceutical companies spend billions to research, develop and advertise new medications, health plans' drug costs rise as much as 20 percent a year.
Hospitals and doctors are demanding better reimbursement deals.
After years of agreeing, reluctantly, to demands to discount their prices for services, many health-care providers in Cincinnati and elsewhere are reporting substantial financial troubles.
On Friday, Mercy Health Partners announced a nearly $52 million loss for 2000. And, since 1997, three Cincinnati-area hospitals have closed or are marked for closing.
Fed up with low rates of reimbursement, some hospitals and doctors last year started dumping low-paying health plans. Many more have pushed for and received better rates in recent contract talks.
As a result, health plans, especially in Cincinnati, are less likely to offer artificially low premiums to employers to keep or expand market share.
Health reforms and proposed reforms have raised cost fears.
A recent change in federal rules requiring insurers to pay for emergency care even if the situation turns out to be a non-emergency has driven up emergency department use, insurers say.
Insurers and employers also fear, if bills allowing patients to sue insurers for denied care, that health plans face even more financial liability. Already, various federal and state mandates requiring coverage for services ranging from cancer screening tests to mental health services to alternative medicine are adding to costs, they say.
The probable 2002 premium increases continue a trend that has been going on for several years.
In Cincinnati, average health-benefit costs for employers declined 5.5 percent in 1998, but grew 6.4 percent in 1999 and 12.1 percent in 2000. Rates for 2001 are expected to grow 10 to 13 percent, Mr. Jost said.
The increases mean workers can expect a variety of benefit changes and increased co-payments for health services.
Many health plans are switching to three-tiered benefits, which charge the lowest co-payments for generic drugs, a higher rate for brand name drugs on the health care plan's formulary, and higher still for non-formulary brand name drugs.
Some employers also are considering multi-tiered co-payments to visit high-cost doctor groups or other services, Mr. Jost said.
A few companies are offering defined-contribution plans, in which the employer offers a flat payment for a basic level of health benefits and leaves it up to the employee to pay the difference if they want more expensive plans that offer wider choices of doctors or medications.
Other employers are offering combinations of medical savings accounts and lower-cost, cata strophic health plans. The savings accounts allow employees to set aside pretax income for routine medical needs, from eyeglasses to doctor visits. But employees who need care for more serious medical problems face deductibles of $1,000 or more when covered by catastrophic plans.
In past years, thanks to the strong economy and tight labor market, employers have been absorbing much of the increase in health-benefit costs. Now, employers are less able to cope with the costs. Yet many workers have gotten used to the good times, Mr. Slater said.
We do have an aging population and they do require more services, Mr. Slater said. "But we also have a spoiled population that expects to get all the latest care while paying very little. For several years, lots of employers were willing to pay the price of high benefits. Now, (employers) are starting to say I can't absorb this anymore.
Larry Savage, president of ChoiceCare/Humana in Cincinnati, also predicted double-digit rate increases for 2002.
We're seeing the double-digit trend now. The market is probably going to experience that into 2002 and probably a bit longer, Mr. Savage said.
Mr. Savage and Mr. Slater said health-care costs will continue to soar until individuals become better health-care consumers. They predict people will start shopping around more aggressively for health care once they start paying more of the bill.
Certainly new drugs and new technologies have had a positive impact on health care. But has it been the appropriate use of technology? Not every new drug is the right drug for every case, Mr. Savage said.
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