Sunday, November 10, 2002

Health care costs bite deep but more pain predicted next year

By John Eckberg
The Cincinnati Enquirer

Virtually all companies on the Greater Cincinnati 100 roster have this much in common: Premiums for health insurance have exploded in the past year, and the shock waves are building for another blast in 2003.

"I can't think of anything else that goes up by 20 percent a year," said Elio Zerbini, vice president of finance at Reece-Campbell Inc., a Cincinnati-based general contractor that employs 90 from its South Cumminsville offices.

The firm was ranked 49th in the Cincinnati 100 list of top privately held companies in the Tristate.

"We've been lucky that our increases have been double-digit, but last year, our carrier wanted to increase our premiums by over 20 percent. So we switched our carrier for the first time in maybe 10 years."

When an economy is contracting, any increase in costs will inevitably slam into a company's balance sheet and go right to the bottom line. When those costs increase as much as health care has increased, the impact is huge.

Sharron M DiMario, executive director of the Employer Health Care Alliance, a Norwood-based coalition of employers representing 55 companies, projected that companies in 2003 will see a mid-20 percent increase in premiums.

It doesn't matter if the company is large or small or publicly traded or privately held, either.

"All employers are challenged by health care this year," she said.

"Lots of variables contribute. There are rising hospital costs, greater utilization of health care as more people use it. Prescription costs may have stabilized, but still there has been growth," she said.

One contribution to the rising cost - utilization - may be a direct result of employers offering policies during the heady 1990s, when retention of employees became a pressing corporate concern.

Health care became a symbol of employer largess and was used by workers for relatively minor medical needs. "That, too, contributed to utilization," she said.

Hewitt Associate's Health Value Initiative projects that health care benefits will increase an average of 15.4 percent next year.

The group estimates that expenses to plan sponsors will double in five years if current trends continue.

Hewitt analyzed 2,000 health plans covering 300 employers and 16 million participants to generate its estimates.

The firm found that the average per person cost of insurance with a health maintenance organization would increase to $5,982 next year.

The average per person cost with a preferred provider organization or PPO will be $6,367 next year, Hewitt determined.

Dennis O'Leary, president of F.D. Lawrence Electric, which employs 125 people and has its headquarters in Cincinnati, worries that by 2005, family health insurance may approach $10,000 a year.

"That's scary if you have a employee making $25,000 a year and you have to add $10,000 for medical. But I have doctor friends and I know they're getting pounded, too," he said.

"Somebody better get a grip on something because the last thing I want to see is Hillarycare," he said, referring to a failed proposal from the early 1990s and backed by former first lady Hillary Clinton that attempted to bring sweeping changes to the medical delivery system in the United States.

Like many companies, F.D. Lawrence has tweaked some aspects of health insurance.

Costs have been shifted back to employees, Mr. O'Leary said. Deductibles have been raised. Workers know that overutilization will lead to higher premiums.

He said one approach that has potential is to create medical savings accounts that would follow workers from company to company.

"Also, I think too many people are seeing a doctor for a knee-ache, thinking it's cancer," he said.

"It's totally overused. I will say this: The cost of health care is really getting to be a scary part of keeping a viable business."


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