Spokane-area businesses, battered by several straight years of mostly double-digit percentage increases in group health-plan premiums, will have to find ways to cope with more of the same next year.
Benefits consultants and representatives of several of the Inland Northwests larger health plans say that 2004 rate hikes here probably will range mostly from about 12 percent to 22 percent, with 15 percent being typical, which would be similar to this years premium increases.
They say the usual culpritsexpensive new medical technologies, still-escalating prescription drug costs, heavy utilization of health-care services by consumers, and the aging populationall are continuing to drive rates upward.
One trend that will be much more pronounced next year than in the past, though, is employers passing on a bigger portion of those unrelenting cost increases to their employees, observers say.
The days of 100 percent-paid medical plans are over, says Curtis Taylor, senior vice president and manager for the Eastern Washington and Idaho operations of insurance giant Marsh Inc.
Marsh designs and manages insurance programs, and works with about 1,000 medical-plan clients in Eastern Washington. Taylor has extensive knowledge of that side of the insurance business, having served as an executive with Premera Blue Cross, Washington states largest health insurer, for 13 years.
He and others in the industry note that employers have been trying to hold down premium increases by restructuring their benefit plans to reduce costs, such as by raising employees co-payments and deductibles. Those efforts likely will intensify next year, and employers also will begin shifting more of those added costs to workers through payroll deductions.
We havent seen a softening (of health-plan rate increases) in Eastern Washington at all, Taylor says. When you look at an employers costs, health care is second to salary, so that obviously is a major concern.
I think youll start seeing health reimbursement accounts becoming a bigger factor, with the potential to emerge as the popular choice among employers over the next five years, he says.
Introduced nationally just last year, health reimbursement accounts (HRAs) are defined-contribution health-care plans, one of several types of what are called consumer-driven or consumer-directed plans that shift greater responsibility for managing health costs to employees.
Employers set up expense accounts with a specific amount of moneysay, $1,000 to $2,000 a yearfrom which employees draw to make health-care purchases. When accounts are exhausted, enrollees typically must pay out of pocket until an annual deductible is met, after which traditional insurance kicks in.
One of the allures of HRAs from a consumer-incentive standpoint is that they allow employees to roll over unused funds at the end of each year, so you dont lose it if you dont use it, Taylor says.
People at high risk will gain a better understanding of how to spend the dollars more wisely through such plans, he says, adding, At the end of the day, I think its a good thing for employers.
That trend, though, still is in the early stages. Based on what Marsh is seeing, small employers here can expect to see average premium increases of 15 percent to 20 percent next year, while companies with 50 to 250 employees are more likely to be in the 12 to 18 percent range, Taylor says. The largest employers probably will see slightly smaller rate hikes, averaging 12 percent to 15 percent, he says.
Hewitt Associates, a Lincolnshire, Ill.-based consulting firm, recently projected a 12.6 percent average increase for employers nationwide, which it said would be lower than 2003s 14.7 percent rate. Hewitt said the average employee contribution in 2004 is projected to be $1,565, or about $130 a month, representing 22 percent of the overall health-care premium. That average is up from $1,276, or $106 a month, this year.
The good news is that we expect health-care costs will begin to moderate over the next few years. The bad news is that companies should still expect 9 to 14 percent rake hikes, says Hack Bruner, Hewitts national health care practice leader. Clearly, health-care cost increases are not going away any time soon; however, we are seeing some moderation in hospital cost increases and stabilization of prescription drug costs.
In this region, at least, that upbeat outlook isnt shared.
Premera, one of Eastern Washingtons largest health-plan providers, expects its health-plan rate increases next year to be mostly in the low to mid-teens, which would be down a bit from this year, says spokesman Scott Forslund.
However, he adds, Its still a very challenging environment, obviously.
Similarly, Group Health Cooperative, the big Seattle-based health-maintenance organization that has a large subscriber base here, expects to raise its health-plan rates for small businesses by percentages in the low to mid-teens next year, which probably is slightly lower than last year, says Greg Swint, Seattle-based vice president of sales and marketing.
However, he says, I dont see a real abatement of double-digit increases. Its hard to talk about moderation when youre still in double digits.
Even the competition-driven underwriting cycle that years ago caused premium increases to soften every few years seems to have been blunted now by cost accelerators such as the aging population and new technologies, Swint says.
Market trends that are shifting a bigger share of health-care costs from employers to employees arent necessarily a bad thing, he says.
There certainly is merit in you and I as consumers paying more for our care and understanding more what care costs. In the long run, what really is going to keep people healthy is people changing their lifestyles, he says. That extends beyond what insurers or providers can do. Its a societal issue.
Asuris Northwest Health, a Spokane-based nonprofit health plan and subsidiary of Seattle-based Regence BlueShield, expects its average rate hikes next year to be in the 18-percent-to-22-percent range, which would be about the same as this years increases, says Regence spokeswoman Jodi Coffey.
Asuris plans on Jan. 1 to launch two new individual medical plans and an individual dental plan, targeted at workers who dont have employer-sponsored health coverage and those between jobs.
We realize some employers may be having to make decisions not to offer coverage, and hope the new individual-plan offerings might fill a gap, Coffey says.
One of the new medical plans, called the Comprehensive Preferred Plan, will have an annual deductible of $750 and will provide a high level of coverage, including benefits for preventive care, prescription drugs, and maternity, Asuris says. The other, called the Catastrophic Preferred Plan, will have an annual deductible of $1,500 and will cover inpatient and outpatient care for most illnesses and injuries, but not preventive care, prescription drugs, or maternity, it says.
Like other insurers, Asuris is hearing that employers would like to see a health reimbursement account option, Coffey says. It expects to introduce next year a consumer-directed health plan that integrates an HRA with a high-deductible insurance plan, she says.
We strongly believe that engaging the consumer is part of the solution to the health-care cost problem, she says.
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