Health-care premium hikes returning for encore in '07
Business First of Columbus - by Jeff Bell Business First
Brian Waterhouse sees a familiar trend as he tracks health insurance premium surveys from employee benefits consultants this time of year.
For employers, 2007 looks to bring another round of premium increases approaching 10 percent, said the principal of CCI Benefit Solutions Inc., an employee benefits advisory firm in Dublin.
"They're all in the same wheelhouse with maybe a couple percentage points of difference," he said of health-care cost forecasts from national companies, such as Segal Co., Watson Wyatt Worldwide and Aon Consulting Inc.
Also on his list is a new survey of more than 9,600 employers by United Benefits Advisors, an alliance of independent employee benefit firms, including CCI. It found average premiums are up 8.6 percent nationally and 9.3 percent in Ohio this year after jumps of 9.6 percent and 11 percent, respectively, in 2005.
The survey reported employers expect to see their premiums rise 11.6 percent in 2007. Increases will average 12 percent in the region that includes Ohio. Another forecast, provided by Segal, said increases in medical claims next year will be in the 11 percent to 13 percent range nationally and 9 percent to 11 percent in the Midwest, depending on the type of health plan.
Next year's projected increases will be an improvement over average hikes approaching 14 percent four years ago, but more than twice the current 4 percent general inflation rate as measured by the Consumer Price Index.
"There is a light at the end of the tunnel," Waterhouse said, "if you consider high single-digit (increases) any kind of rate relief."
Cost shift continues
Premium hikes continue to be driven by the cost of medical technology, new biomedical drugs, rising use of medical services by an aging population, insurance company profits and large hospital systems winning reimbursement increases from health plans, he said.
But employers won't be able to sustain double-digit rate increases for much longer, Waterhouse said. That has them looking for more ways to shift part of the costs to workers and encourage them to improve their health through wellness and disease management programs.
Such an approach is taken in consumer-driven health plans in which a high-deductible policy is paired with a tax-favored health savings account. The theory is health plan members will make cost-effective decisions when seeking medical services and take better care of themselves if they have a bigger financial stake in the buying process.
The United Benefits Advisors survey said consumer-driven health plans are offered by nearly 6 percent of employers. Ohio's rate is almost double that, Waterhouse said.
"Nearly 100 percent of our clients ask about consumer-driven products," he said, "but I still think the trend is to tread lightly and offer them alongside a traditional (preferred provider organization) approach. Most companies have not phased out their PPO."
UnitedHealtcare is projecting 60 percent of its health insurance customers in Central Ohio will offer a consumer-driven plan as an option or their only form of coverage in 2007, said Robert Falkenberg, the insurer's CEO for Ohio.
"We're seeing a spectacular change in adoption on consumer-driven plans," he said, "particularly in small group and even midsize companies."
The change is embraced because the plans can save employers about a third on their costs compared to a traditional PPO, Falkenberg said. Their premiums are lower because the high deductibles - in many cases $2,000 or greater - shift more of the cost to health-plan members.
But that can be a problem for hospitals and doctors who have to collect deductibles from patients, said Jeff Biehl, executive director of Access HealthColumbus, a nonprofit group that connects Franklin County's uninsured with medical services.
"We're hearing in the health-care market that more and more people with insurance have become a bigger percentage of bad debt for health-care providers," he said.
The reason appears to be working families have to cover a greater share of their medical costs even though their wages are stagnant.
"It just shifts bad debt back to (hospitals and doctors)," Biehl said. "It's not a pretty picture."
But data show some types of consumer-driven health plans have reduced medical cost increases, said Chris Goldsmith, a Segal vice president and employee benefits consultant with clients in Central Ohio. What remains unclear, he said, is whether reductions are due to health-plan members becoming better consumers or foregoing care to save money.
"Clearly, (consumer-driven plans) shift things around a bit," Goldsmith said, "but I don't think they will affect underlying health-care costs in a significant way unless there are support mechanisms for consumers."
They include online tools that help patients connect with hospitals and doctors who provide high-quality, cost-effective care based on proven medical evidence, he said. Consumers also need to be able to tap into programs that help them manage chronic diseases, to quit smoking, eat better and exercise.
"There are real opportunities to manage claims trends and spending through health-care management," Goldsmith said.
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