Rhode Island businesses can expect double-digit increases in their health premiums this year, prompting many firms to pass the extra costs along to employees.
A survey released last month by The Henry J. Kaiser Family Foundation, a national philanthropy focused on health-care policy, says employer-sponsored health-care premiums jumped an average of 11 percent between the spring of 2000 and last spring.
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Similar increases are projected for the coming year both in Rhode Island and nationally.
Tara Roth, human resources director for Pawtucket-based manufacturer The Cooley Group, recently negotiated her company’s health-insurance renewal for Oct. 1.
“It seems like there were significantly higher costs this year, and the prices were firm,” Roth said. “When the incumbent (insurer) is quoting a 14 percent premium increase and the competition doesn’t come in much lower, that’s pretty surprising.”
Cooley Group was reluctant to ask its 200 employees to shoulder more than the 25 percent share of premiums they paid last year. So the company decided to thin its health-benefits package. The key targets: prescription drugs and emergency room visits.
“We went back and said we were willing to take less benefits in those areas, because we know those are hot-button issues for most insurers,” Roth said.
The company raised its co-pay for ER visits from $50 to $100 and boosted its prescription-drug co-pays by as much as 30 percent. The revisions brought its overall premium down to about an 8 percent increase over last year – and the company avoided passing along monthly contribution increases to its workers.
Many Rhode Island companies are in the midst of negotiations with their health insurers, and – like the Cooley Group – more and more businesses are searching for ways to deflect the higher cost of health insurance. Most companies renew their health policies Jan. 1, although hundreds of firms have renewed plans in recent months.
UnitedHealthcare premium increases nationally will likely be 13 to 15 percent, according to UnitedHealthcare of New England spokeswoman Debora Spano. She said it’s tough to determine an average percentage increase for Rhode Island.
Blue Cross & Blue Shield of Rhode Island spokesman Scott Fraser said the average premium increase for 2002 should range between 10 and 15 percent. But he cautioned that it’s difficult to peg an average increase, noting that some companies will see larger rate hikes while others might actually see premiums go down.
Richard Singleton, a senior partner at Group Benefits Advisors in Warwick, said the firm’s clients are seeing average premium increases of 10 to 11 percent. The company devises employee-benefit plans for more than 400 Rhode Island and Massachusetts firms.
With the stagnant economy eroding profits, Singleton said many companies cannot afford to absorb double-digit increases in health premiums. Instead, businesses are increasing co-pays for an array of health services and are asking employees to pay a larger share of costs.
Some companies also are adding deductibles for hospital stays or ER visits.
Singleton said about 20 percent of his firm’s clients now are adding a hospital deductible to their plans. Many of those firms then pay the deductible – typically $300 – if an employee does require hospitalization. The premium savings outweigh the deductible costs, Singleton said.
“You can lower your overall premium by as much as 10 percent,” he said. “And if an employee ends up in the hospital, just cut the check. It makes sense, because a very small percentage of employees will use hospital services.”
Jim Moniz, a benefits consultant with Lighthouse Financial Group in Warwick, which advises the Cooley Group and other area companies, said his clients also are seeing average premium increases between 11 and 13 percent.
Although health premiums for years have been rising at several times the rate of inflation, Moniz said companies until recently had been hesitant to pass along those costs to employees because workers were hard to find.
Now, the labor market has loosened a bit and many companies are opting to cut costs.
“Two years ago the marketplace was heading in this direction, but because of the tight labor market, companies backed off (passing through costs),” Moniz said. “But a lot of clients will say they can’t afford to absorb these levels of increases. Cost control is really carrying the day at many companies.”
Moniz says many of his clients are redesigning benefit packages or revising contribution schemes in an effort to soften the blow of higher health premiums.
Another strategy for cost cutting is self-insuring, in which employers take on the financial risk of paying their employees’ health-care costs.
Self-insurance is popular among large companies and about 36 percent of U.S. workers with employer-based health coverage are in self-insured health plans, according to the Self-Insurance Institute of America.
Although companies that opt for self-insurance typically take on more risk, they also lower costs in the long run, Moniz said. While many of his clients have been considering self-insurance, few have decided to become self-funded.
“That’s sort of the acid test on the competitiveness of an insurance market,” Moniz said. “I think the fact that self-funded plans are often not attractive means that the competitiveness still is very much there.”
