The first quotes are coming in, and they don’t look good: For Oct. 1 and Jan. 1 renewals alike, brokers say, health insurance premiums are going up in the double digits, 13 or 14 percent on average, more than three times the growth of Rhode Island’s economy.
UnitedHealthcare of New England won’t say how much it’s hiked its base rates, but at Blue Cross & Blue Shield of Rhode Island, which covers more than half the state’s population, James J. Joy, chief financial officer, said his company’s rates are up about 12 percent.
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Rises in medical costs make up the bulk of annual hikes, and Joy said they’re similar this year to last, 10 to 12 percent, with higher pay for doctors offsetting a slowdown in overall usage and in pharmaceutical costs. But while last year, Blue Cross didn’t ask small groups to contribute to reserves, keeping many hikes in the single digits, this year they’ll pay about 2 percent.
In addition, large groups, which are rated individually, rather than collectively like small groups, are seeing about the same medical trend as smaller employers, Joy said, even though traditionally, they’ve been “a point or two lower.”
The bottom line: double-digit premium hikes for just about everyone – not as big as in 2004, but bigger than the last round.
“I don’t think I’ve seen, in the last few months, anything in the single digits,” said Joel H. Cooper, executive vice president of Cranston-based Benefits Unlimited (now part of USI Holdings), a major brokerage that deals with large and small employers.
The vast majority of health plans renew on Jan. 1, Cooper noted, so most employers haven’t received quotes yet, but among those who renew Oct. 1, and among early birds looking at Jan. 1, “I’m seeing between 10 and 18 percent, with the midpoint being something about 14 percent.”
Deborah A. Wozniak, of Marsh USA, in Boston, said Massachusetts and Rhode Island clients are seeing hikes between 13 and 13.5 percent, higher than last year, but “consistent with what we thought would happen” if employers didn’t make greater efforts to curb medical costs. “They could be dropped to the 10-percent range if employers changed their plans,” she said.
Surveys by Marsh and other brokerages and health plan experts have shown businesses cut costs by various means: switching carriers, switching plans within the same carrier, making employees pay more, reducing benefits, increasing deductibles and co-payments.
Blue Cross’ lower premium hikes last year, for example, helped the company to partially offset the loss of the state insurance contract. This year, Joy said, the company is seeing employers move away from BlueCHiP, an HMO product that used to be substantially cheaper than HealthMate but, through benefit enhancements, has become nearly as pricey. With big enough deductibles, HealthMate plans can actually cost less now, and they tend to appeal more to Rhode Islanders.
But switching from BlueCHiP to HealthMate, or from HealthMate to a United plan, isn’t going to make a big enough difference in the long run, both Wozniak and Cooper argued.
Shifting costs to workers isn’t the answer, either, experts agree, because they can only afford so much, and pushing them off the insurance rolls won’t help anyone. As it is, a new U.S. Bureau of Labor Statistics report shows, only 53 percent of workers participate in employer health plans, and only 39 percent of those earning less than $15 per hour, even though 70 and 58 percent, respectively, have access to coverage.
So what does that leave?
Well, for starters, consider what you’re paying for, said David LoCascio, co-founder of United Benefit Advisors and a consultant in Indiana.
A UBA survey, which covers 12,716 health plans sponsored by more than 8,700 employers – including 387 in southern New England, but only four in this state – found that while nationally the average monthly premium this year is $327 for single coverage, and $927 for family coverage, in the Northeast, it’s $371 and $1,022, respectively.
A closer look reveals that while only 39.6 percent of health plans nationwide include no deductible, in the Northeast it’s 79.4 percent. Plans in this region also have lower out-of-pocket maximums (the median is $1,500, compared with $2,000 nationally), and while only 45.1 percent of U.S. plans have unlimited lifetime benefits, in the Northeast it’s 82.7 percent.
“The richness of plans in your neck of the woods is notably higher than anyplace else,” LoCascio said in an interview.
Even the least-expensive plan types are pricier in the Northeast: HMOs average $377 a month for single coverage, compared with $317 nationwide, and the median premium for consumer-driven health plans – which, as it is, are rarest in this region – is $264, compared with $250 nationally and as little as $195 in the West.
United CEO Stephen J. Farrell, who declined to be interviewed for this story, but sent a written statement, said that while nationally, United’s medical costs are up about 8 percent for 2006, “these numbers are not aligned with our market here in Rhode Island,” because “Rhode Islanders enjoy some of the richest benefits in the country.”
Market forces are making that increasingly difficult, Farrell has said, and in his statement he noted that “we are seeing a shift to a buy-down of health benefits” – meaning cutbacks – by “employers who are trying to manage their expenses.”
This renewal season, United is offering a new line of high-deductible plans coupled with health savings accounts that, Farrell has said, can cost 30 to 40 percent less than other plans. Blue Cross has its own HSA line in the works, but it’s not heavily promoting it, whereas United has become a major advocate of “consumerism” in this market.
The idea is that if workers see how much their health care costs are, they’ll think twice before getting that $800 MRI, or going to a $250 specialist instead of their primary-care doctor, or getting that $100 prescription instead of the $20 generic pills. The bigger consumer-driven plan carriers, including United, offer call-in lines staffed by nurses as well as extensive Web resources to help consumers make more informed choices.
Marsh is a big proponent of this strategy as well, though Wozniak said the brokerage also urges clients “to be really thorough in the evaluation and rollout” of consumer-driven plans, because they require extensive education and in-depth discussions with workers.
Since HSA plans only became legal in Rhode Island this summer, employers are just starting to look into them, Wozniak said. “We had early adopters who wanted to do it right away,” she added, but it’s employers with highly educated, high-income workers, “law firms and things like that.”
In Massachusetts, where consumer-driven plans have been available longer, a similar demographic has been drawn to them, Wozniak said, whereas manufacturers, for example, “perceive a lot of barriers” to making them viable.
Blue Cross, meanwhile, is taking a different approach. Like “consumerism,” it’s based on the notion that workers must take responsibility for their own health care, but rather than focusing on prices, it urges them to make healthier choices and manage chronic conditions.
Whatever employers choose to do, health plan leaders and brokers agree on one thing: They really need to stop going along with the status quo.
“What we’re trying to do is encourage employers to have an open mind to making pretty significant changes in the way business is done in health care,” Cooper said. “I call it ‘bend the trend.’ It doesn’t stop going up; we just want to moderate it some.”
