Health plan costs are on the rise in the Inland Northwest
Some small concerns see double-digit rate hikes; others closer to 5 percentJanuary 17th, 2013
Health-plan costs for Spokane-area businesses are rising yet again this year, at rates that range from about 5 percent up to double-digit percentage increases, with variations mainly depending on employee numbers and plan design.
Area employers and benefit advisers describe a benefits landscape that remains in flux as the cost of health care continues to rise, combined with impacts from health care reform legislation.
"Small business groups are still getting hit hard with higher rate increases," says Mark Newbold, a principal and employee benefits adviser with Moloney O'Neill Benefits LLC, which brokers plans for about 750 employer-employee groups in the Inland Northwest.
Newbold says most groups here with 50 or fewer employees are seeing rate hikes of about 10 percent to 12 percent, adding that their rates are affected by size as well as the group members' ages, gender, and industry exposure.
He says employers with 50 to 99 employees have had 7 percent to 8 percent increases on average, while large employers are probably closer to a 5 percent hike on average.
More than 95 percent of Spokane County businesses fall into the category of 50 or fewer employees, the Washington state Employment Security Department says.
Newbold adds, "A lot of larger employers are self-funding, so they can manage their costs. The smaller group rates are based on the performance of an overall pool. If that pool performs poorly, all in the pool pay more."
Mercer, a benefits consulting firm that conducts a national survey of employer-sponsored health plans, found that U.S. employers overall expected a relatively low average increase of 5 percent for health benefit costs this year by making deliberate plan changes. If considering Washington state as a whole, the average 5 percent is holding true, says Drew MacAfee, a Spokane-based Mercer practice leader.
"That's the average looking at both large employers and small employers, after plan design changes," he says. "More are self-insuring, mitigating the risk or going down the road of self-funding. More than anything else, we're seeing more consumer-driven health plans."
Consumer-driven health plans are described in the industry as ones that allow participants to use personal health savings accounts (HSAs) or employer-funded health reimbursement arrangements (HRAs) to pay for routine health care expenses directly. They typically include a high deductible that protects members from catastrophic medical expenses.
MacAfee adds, "There's a cost shift moving to employees, and communication asking employees to take a greater responsibility and care of their own wellness."
More employer groups also have moved toward self-insurance arrangements, at least partially, in which the company provides benefits with its own funds and assumes risk for payment of claims, while paying an insurance provider to administer the plan.
Spokane Valley-based Inland Empire Distribution Systems Inc., a warehousing and distribution company with about 60 employees, had a rate increase of about 8 percent this year. Jim Ewers, president and CEO, says the company initially thought it would face a double-digit rate hike, but it worked with Mercer to broker a lower increase this year from an insurance provider.
"We were able to get it down to about 8 percent. For our company, that's about a $27,000 cost increase," Ewers says. "We're blending more self-insurance into our program to keep our insurance premiums down. The premiums are certainly being impacted by government mandates."
As an example of partial self-insurance in recent years, the company set its prescription deductible for brand-name medications at $250. As part of that, the employee pays about $40 and the company pays the rest up to $250, "so we kind of self-insure the difference," Ewers says. Once the deductible amount is reached, insurance covers prescription expenses beyond that amount, he adds.
He says, "What's happening out there is buying insurance becomes very creative in investigating different methods of blending self-insurance with the coverage from the insurance company and essentially sharing risk."
Deb Brady, Associated Industries' director of employee benefit services operations, says a rate increase of 10 percent to 12 percent is more typical of what members of that Spokane-based nonprofit employers group are seeing this year. It offers employer memberstypically small groups of 50 or fewer employeesa health insurance plan through ODS Health Plan Inc.
"Clearly, I've heard that health care reform has impacted our rates this year," she says.
She also says a larger number of the employer groups are using a wellness program provision offered through ODS to obtain a 4 percent rate reduction. Participants complete a confidential blood screening and answer wellness questions online. Based on that, they receive a health assessment.
Premera Blue Cross, a major insurance provider in the state with 1.5 million enrollees, says it continues to see medical costs rise as a key driver of the cost of coverage, although use of services has moderated. While employer groups' rates can vary based on previous claims history, "employers who add wellness programs and ways of engaging members to take care of their health needs are seeing more success in moderating cost increases," says Seattle-based Premera spokeswoman Amy Carter.
Phyllis Gabel, Inland Northwest Health Services' chief human resources officer, says the Spokane-based nonprofit with 1,000 employees has about 1,400 participants in its self-funded health care benefits plan, including dependents.
While INHS went several years without any insurance cost increases, Gabel says this year's costs went up about 12 percent, and the organization saw a similar increase last year.
Gabel adds that one category of coverage called "specialty pharmacy" is having a big cost impact. While generic drugs can be found for many medicines at less cost, newer specialty pharmacy drugs are complex both in design and administration, such as shots given to rheumatoid arthritis patients.
She says INHS also promotes use of its wellness program, Health@work, with a free medical screening in the fall to identify up to five health risk factors such as high cholesterol. If participants take steps to reduce the risks, such as diet and exercise, INHS kicks in "up to an extra $100 a month toward paying their share of benefit costs," she says.
Premera's Carter says that the insurer anticipates that by next year, two health care reform provisions will add direct costs for employers. Those provisions include a tax on insured plansbut not self-funded plansof an estimated 2 percent of premiums, she says. The other provision is called a reinsurance assessment fee affecting all employers. It will fund a reinsurance pool to stabilize each state's individual market in the exchange, based on the influx of new and potentially less healthy customers in 2014.
"We estimate that cost will be about $5.25 per member, per month in 2014," she says. "Obviously, that cost varies significantly depending on the number of people covered by an employer's plan."