August 04, 2000|By Julie Bell | Julie Bell,SUN STAFF
A number of insurers are seeking double-digit premium increases from area employers as they renew contracts for providing health benefits to workers, with prices for some small employers climbing 20 percent or more, companies, consultants and agents involved in negotiating the rates say.
The increases, which appear to be the highest in several years, come as health insurers struggle to meet soaring prescription drug prices, computer-system upgrades and pay increases for doctors who are rebelling against low reimbursement in some areas of the country.
Some companies don't intend to pass on the price increases to employees. Giant Food Inc. of Landover, for example, even added to employee health benefits in the face of rising health insurance costs, a move the company considers essential to competing for workers.
"There's so much going on in the labor market that you have to have an edge," said Paul Gunby, Giant's benefits director, referring to difficulty hiring workers amid a labor shortage.
His company was just handed a premium increase in the low double digits for administrative employee benefit plans effective May 1.
Gunby said it's too early to tell whether prices his company will face for the next benefits year will be higher. Annual scientific surveys of employers' health insurance premiums don't come out until later this year, meaning evidence for the increases is anecdotal.
In addition, individual company circumstances mean not all employers face price increases.
Fast-growing Baltimore firm Gilden Advertising has seen rates drop slightly as it hires young workers to complement a senior management team, apparently causing actuaries to lower its risk ratings, Gilden Executive Vice President Evan Davis said. The company has about 40 employees, up from 15 five months ago.
But Kaiser Permanente said it has been seeking rate increases of 10 percent to 15 percent from employers as it renews contracts for the 550,000 people it covers in Maryland, Washington and Virginia.
Bethesda-based Coventry Health Care Inc. said in its earnings, released earlier this week, that it has negotiated increases of greater than 13 percent for some renewals in the second quarter and expects raises on employer-sponsored plans renewed in the third quarter to exceed 12 percent.
Additionally, consultants such as William M. Mercer Inc. and Marsh USA, which negotiate with insurers on behalf of large and small employers, respectively, said the increases they are seeing are in the double digits for next year.
Edward J. Susank, a principal for Mercer in Washington, estimated that large area-based employers his consulting company represents are facing increases averaging 9 percent to 11 percent, with some significantly higher.
And Blaine Bos, the Chicago-based spokesman for Mercer's annual health benefits survey of employers, said the nation's largest companies - those with tens of thousands of employees - are reporting they have negotiated rate increases for the coming year of 13 percent to 15 percent for health maintenance organization plans.
Premiums for other kinds of plans are rising 10 percent to 12 percent, he said.
John Colmers, executive director of the Maryland Health Care Commission, which regulates the contents of benefits packages that insurers offer to small employers, said state actuaries project increases of 9.6 percent for health maintenance organization plans and 12 percent for preferred provider organization ones.
The increases might force the state to reduce the benefits that insurers are required to include in a standard plan offered to small businesses so the plan remains within affordability guidelines, Colmers said.
A Mercer survey released in December showed the cost of employer-sponsored health plans jumped 7.3 percent nationwide in 1999 and 6.2 percent in 1998, after five years of essentially no health benefits inflation.
The increases come as prescription drug prices rise at least 15 percent, and as many employers run out of options for moving employees into less expensive plans.
The movement of employees out of more expensive traditional company plans, called indemnity plans, appears to have all but bottomed out, dropping to 11 percent last year from 13 percent in 1998, Mercer said.
And health maintenance organizations have milked about all the savings they can from reducing the time patients stay in the hospital or switching inpatient surgeries to outpatient ones, said Christopher J. Mathews, health care practice group leader in Washington for consultant Watson Wyatt Worldwide.
As a result, they're looking for other ways to shore up insurance companies that in some cases have been losing money.
"We're actually trying to mount a turnaround so we can become profitable," Kaiser Mid-Atlantic spokeswoman Susan Whyte Simon said to explain her company's increased rates.
