Fever afflicts health costs

Medical insurance premiums soar as much as 20%

Deductibles, co-pays rise

Workers are asked to absorb cost as job market worsens

November 11, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

Last year's double-digit health premium increases are being followed by even larger increases this year, and employers are looking to pass more of the cost on to workers.

The escalation of health costs, experts say, in part reflects a backlash against managed care. Health maintenance organizations (HMOs) brought costs down in the mid-1990s, but consumers objected to barriers to getting care, forcing insurers to loosen the reins.

"Heavily managed care was a victim of its own success," said Jon Gabel, author of several recent studies on health costs. "Managed care doesn't want to get between the physician and the patient any more, because of the backlash. I don't see who's going to be going over the doctor's records and telling them they're naughty."

Gabel, who is vice president of the Health Research and Education Trust, a research group affiliated with the American Hospital Association, said, "Maybe after a couple of years of double-digit inflation and thousand-dollar deductibles, people will be more willing to accept a tightly managed HMO, but not yet."

The double-digit inflation is already here, national surveys and local interviews show. While thousand-dollar deductibles are rare, it's clear that workers are shouldering higher deductibles, higher co-payments and a larger share of the premium costs.

A national survey by the actuarial consultants Milliman USA released last week found HMOs increasing their premiums by 16 percent for next year - up from about 12 percent this year. (Many plans negotiate new rates in the fall for coverage that begins in January.)

A survey of employers by the benefits consulting firm Watson Wyatt Worldwide, released last month, found health costs - including premiums and costs for self-insured plans - rising 13.6 percent next year, up from a 12.2 percent increase in the current year.

Locally, increases are about in the same range.

"We're seeing definitely over 10 percent and frequently over 20 percent," said John Miller, executive director of the Maryland Health Care Coalition, a group representing about 30 large employers.

Not only are premiums going up at rates in the mid-teens, but there's wider variation than in past years, said Chris Mathews, health care practice leader for the mid-Atlantic region of Watson Wyatt.

While, on average, premium increases in this market are similar to those in the national surveys, Mathews said, "Some are below average, some are two times the average."

The differences, he said, are sometimes attributed to the age and health of each employer's work force, but sometimes to how well the insurers are managing health care and costs.

Steven Trumble, health and welfare practice leader at Aon Consulting's Baltimore office, believes employers here have been quoted increases at or slightly above national rates - generally in the 15 percent to 20 percent range, but have been able to "pare that back with design changes," such as higher co-payments or deductibles. He said his office handles 300 to 400 health plan renewals at this time of year.

The national surveys show that employers have been swallowing most of the escalating costs the past few years - with a tight job market, they were concerned with attracting and retaining employees - but now are passing more costs to the workers.

In the Watson Wyatt survey, 71 percent of employers said they planned to reduce benefits or increase co-payments. Either way, workers will be paying more out of pocket for health care.

"We're raising the co-pay, as most other employers are," said Raymond Brusca, vice president for benefits at Black & Decker Corp.

In addition to higher out-of-pocket costs for prescriptions and visits to doctors' offices, Black & Decker's 12,000 employees - about 30 percent of them in Maryland - will have to get advance approvals for some expensive procedures, such as medical resonance imaging (MRI) exams, and for some prescriptions.

James L. Correll, president of the Baltimore Building and Construction Trades Council, said nearly 20,000 workers in building trades were due, on average, a 50-cent-an-hour raise last month, but had to divert 15 cents of that to cover higher health costs and to maintain benefits. Most construction trade union workers, he said, are in a union-administered multi-employer health plan.

Similarly, Larry Ginsburg, secretary-treasurer of District 1199E-DC of the Service Employees International Union, said health insurance costs are at the center of union bargaining for 1,800 health care workers over the next six months.

"We're in negotiations with a number of nursing home companies," said Ginsburg, "and that is the primary cause of difficulty. Their [premium] rates are being increased, and we're usually being given some sort of choice between higher co-pays and higher premiums."

Over the past few years, prescription costs have borne much of the blame for the acceleration in premiums.

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