Pending ‘Double-Digit’ Premium Increases Will Trickle Down to Consumers, the New York Times Reports
While consumers nationwide will face "double-digit increases" in health care costs next year -- the "biggest surge" in medical inflation since the early 1990s -- employers will likely "absorb" most of the "hefty" rise in cost to retain key employees in a tight labor market, the New York Times reports. Still, many companies will "shar[e] the burden" with employees through larger paycheck deductions and higher deductibles for care, including prescription drug costs. The rising costs may also prompt low-income and self-employed workers to drop their coverage, leading health policy experts to predict a rise in the number of America's uninsured. "If the double-digit increases continue and the economy turns down, that could eventually drive the uninsured to 50 million or higher," Jack Meyer, president of not-for-profit Economic and Social Policy Research Institute in Washington, said. Meanwhile, employers facing premium increases have "start[ed] to get panicky," Janet Trautwein, policy director of the National Association of Health Underwriters, said. On average, large employers will boost payroll deductions by 20% and raise deductibles and copayments by 15%, Hewitt Associates health care expert Kenneth Sperling said. According to a Hewitt Associates survey, employees of large companies will pay an additional 18% overall -- $1,401 on average -- in 2001, while their employers' health care costs will rise 9.8% to about $4,026 per employee. Government employees also will face rising costs. In the federal employees' health plan, monthly payroll deductions will rise 14% to $74.23 in January for most single employees, and increase 21% to $175.30 for families, Blue Cross and Blue Shield spokesperson Bill Pierce said. And in the Golden State, with 24% cost increases looming for California Public Employees' Retirement System members enrolled in the group's "financially troubled" PPOs -- about 230,000 patients -- CalPERS trustees will meet this week to discuss possible coverage cuts to control the rise in premiums. CalPERS may also double the annual deductible that employees pay to $1,000 per family and add a $50 copayment for emergency room visits. However, for the 850,000 California public employees enrolled in HMOs, premiums will likely jump 9.2% in 2001 after several unions rejected benefits cuts last summer.
'Shock' to the System?
During the past two years, employers covered most of the increase in health care costs to retain workers in a tight labor market, but if the economy slows, that may change. "The American public is in for a shock when the recession comes," Jon Gabel, vice president of the American Hospital Association's Health Research and Educational Trust, said, adding, "They have no idea how much health care costs have increased over the last five or six years." Large companies that offer choices of health plans have "long arranged" reduced premiums for low-cost plans, and with health insurance costs rising, small firms will likely "follow suit" and offer similar options to employees. In addition, Gary Ahlquist, a senior vice president at Booz-Allen & Hamilton, predicted rising costs will prompt more employees to choose high-deductible insurance with lower premiums, marking a "change from past years." According to Richard Ostuw, a Watson Wyatt health care expert, the popularity of high-deductible plans has waned because "rank-and-file employees don't have the resources to draw on, if they have to come up with $1,000 quickly." Wellpoint Health Networks' California Blue Cross group, which covers 850,000 state residents, also plans to expand options for consumers, lowering premiums to appeal to the uninsured and requiring members "who need care" to pay more (Freudenheim, New York Times, 12/20).
The Colorado Example
In Colorado, health insurance rate hikes will average about 20% to 30% next year for the Denver area, with some companies experiencing premium jumps as high as 50% to 98% -- a trend that "shows no signs of letting up," the Denver Post reports. In 2000, Colorado HMOs have suffered "tens of millions of dollars" in losses, prompting across-the-board rate hikes in 2001 to help "stem the tide of red ink." Health plan executives contend that prescription drugs, "pricey" new medical technology, "hard bargaining" by doctors and hospitals and the threat of patient litigation have driven up health care costs. As the population continues to age, health insurance costs will continue to rise, United Healthcare of Colorado CEO Vic Lazzaro said, adding that rate hikes will likely jump "every bit as much next year." However, experts predict that Colorado small businesses will "ge[t] hit the hardest." VanGilder Insurance Corp. senior vice president Anita Boissoneau said, "You can't negotiate the rates like you can with larger groups." To help lower costs, many small firms will "par[e] down" benefits and increase prescription drug copayments or deductibles for physician and hospital visits -- placing more of the cost burden on "heavy users" of the health care system. However, Boissoneau added that many small businesses will "swallow" the rate hikes and avoid dropping health benefits for employees. Larger employers have absorbed most premium increases up to 20% to 25%. Meanwhile, state employees will pay an average 18% more for health benefits in 2001, Jan Rothmeyer, Colorado's health benefits manager, said (Austin, Denver Post, 12/10).