Health insurance costs likely to climb

DIANE STAFFORD; The Kansas City Star
Last updated: October 17th, 2008 01:29 AM (PDT)

Brace yourself for the next financial whammy:

It’s open enrollment season for workplace health insurance plans – and many of the 158 million Americans who receive employer-based health insurance can expect to pay more of the costs.

About two-fifths of U.S. firms do not offer employee health benefits. And even at those that do, many health-benefits packages will be a “skimpier and less comprehensive,” said Drew Altman, chief executive of the Henry J. Kaiser Family Foundation.

Kaiser, together with the Health Research & Educational Trust, recently released a 2008 snapshot and 2009 outlook for employee health benefits.

Cost increases for 2009 actually continue a modest cost-containment trend of the last three years – an improvement over double-digit cost increases before 2005.

But the real long-term effect on employers and employees is that premium costs have more than doubled since 1999.

In 1999, total family premiums for employer-sponsored health insurance averaged $5,790, of which workers paid an average of $1,543, according to Kaiser.

This year, premiums for such coverage rose to $12,679, with employees paying an average of $3,354 out of their paychecks to cover their share of the costs, the Kaiser report said.

In 2009 – provided you’re fortunate enough to work where an employer-sponsored plan is offered – you could be asked to pay a bigger share of the premium cost, a higher deductible amount and more out-of-pocket expenses for prescription drug costs and office visit co-pays.

Exactly how much more workers will pay next year will vary widely.

In Western Washington, the three major insurers of workplace health plans have annually increased their rates.

According to the office of State Insurance Commissioner Mike Kreidler, Premera Blue Cross increased its rates for small groups by 19.08 percent in January; Regence BlueShield was this year granted an increase of 8.5 percent; and Group Health Cooperative increased rates by 10 percent.

Over the past eight years, rates have risen as high as 24.1 percent for Premera, in 2000; 21 percent, for Regence in 2004; and 17.71 percent, for Group Health in 2003.

The smallest increases were granted to Premera, 6.95 percent in 2006; and Regence, 3.2 percent in 2006; while Group Health Cooperative cut rates by 1.0 percent in 2007.

Insurers said Thursday they expect rate increases next year.

Regence BlueShield, which offers insurance in most Western Washington counties, will see “a little higher rate increase, but still in the low-teens” for both large and small groups, said spokeswoman Lee Therriault.

“The most important thing is for people to educate themselves,” she said. “Compare and shop with the various plans. Even if your employer offers one insurer, there may be multiple plans.”

Michael Foley, Group Health Cooperative spokesman, said his company has not yet set its 2009 rates, although “we are hitting our expense trend targets and do not anticipate out-of-the-ordinary rate increases.”

He added, “A slumping economy can result in enrollment declines. But as of today Group Health is seeing significant enrollment increases.”

At Premera Blue Cross, spokesman Mark Stuart said there are as yet no specific figures for a 2009 increase, but large employers – with 100 or more employees – “will see an increase of between 7 and 9 percent.”

Nationally, cost increases for employers who offer health insurance plans will average between 8 percent and 10 percent, a Mercer survey indicates. A Towers Perrin survey puts the employers’ cost increase as low as 6 percent.

But employers have said in several surveys that they do not intend to shoulder their increases alone.

Shopping the plan – trying to find another carrier for less money – is being done fairly reluctantly, area brokers said. It causes disruption in health-care providers for employees, plus time and burdensome paperwork.

The most common response is to shift a larger share of premium costs to employees. Area brokers said a growing number of plan deductibles will exceed $1,000, with some getting kicked up as high as $2,000.

Some co-pay costs for office visits are rising, too. And some employers are shuffling their benefits packages in other ways.

For example, Jim Wolf, senior sales representative for Assurant Employee Benefits, says some employers will continue to offer group dental plans, but only if the employee opts to pay 100 percent of the costs.

“That still may be a better deal than the employee could find individually on the open market,” Wolf said. “And there’s also an access question. With a group plan, the employee is guaranteed access where he might be refused individually.”

Employers that have self-funded insurance plans may be better able to mitigate cost increases by redesigning or reinsuring their plans.

Some area employers are trying to hold down their employee health benefits by embracing four options, three of which place more responsibility on employees for spending their health-care dollars:

Health Savings Accounts: HSAs are high-deductible health plans that, like IRAs, can be rolled over from employer to employer. The accounts can receive contributions from individuals and employers. Money in the account is to be used to pay for medical expenses tax-free.

Health Reimbursement Accounts: These are employer-funded plans that reimburse employees for medical costs, up to a predetermined cap. Distributions are tax-deductible to the employer and reimbursement dollars generally are tax-free to the employee.

Wellness programs: More than half of organizations with fewer than 200 employees and nearly 90 percent of larger firms offer some kind of program to encourage better fitness and prophylactic health care, Kaiser reported.

Eliminating coverage for retirees: The Kaiser report found that only about 1 in 3 large firms continued to offer retiree health benefits this year, down from two-thirds of employers two decades ago.

The report also noted that preferred provider organizations covered 58 percent of covered workers; health maintenance organizations, 20 percent; point-of-service plans, 12 percent; consumer-directed plans, 8 percent; and conventional indemnity plans, 2 percent.

Originally published: October 17th, 2008 12:52 AM (PDT)