Monday, August 19, 2002

Daily Grind

Health care premiums on the rise

        In case anybody missed it, health insurance premiums for workers are headed skyward again.

        A new report from the Hays Group, a professional services group with 71 offices in 35 countries, indicates that we can expect medical insurance premium increases to average 14 percent this year, rising to 20 percent in some cases in 2003.

        The cross-industry survey of 1,000 companies illustrates what most American families already know:

        They are getting hammered every time a child, husband or wife has to make a trip to the doctor's office.

Co-payments increasing

        “The most striking change in one year has been the increase in employee co-payments for doctor visits,” said Michael Carter, vice president with the Hays Group.

        The number of plans with co-pays of $15 or more rose from 33 percent in 2001 to 47 percent in 2002. The number of companies whose primary plan had a general deductible increased from 38 percent to 41 percent in the last year while the number of primary plans with hospital coverage subject to a deductible increased from 48 percent to 53 percent.”

        In other words, workers are digging deeper to pay for the ever-rising cost of health insurance. Where is it going to end?

        “That's what employers are asking, too,” Mr. Carter said. “The 15-year history of medical cost increases looks like a roller-coaster ride.”

        When the Clinton administration began investigating a plan for national health insurance in the early 1990s, the annual cost of premiums actually fell - and it fell year after year after year.

        “It was the time of threatened health care reform so everybody was on their best behavior,” Mr. Carter said.

Several factors at work

               The dramatic rise in medical costs is due to several factors, he said.

        Recently, employers have shifted from HMO-type plans that require primary care physician referrals. In 2002, 53 percent of companies used a Preferred Provider Organization as their primary plan. That's up from 40 percent only four years before.

        “It's clear from renewals, claims data and informal surveys that everybody can expect a 15 percent to 20 percent increase next year,” he said. “If you average it out, that's a 17.5 percent medical rate increase. If we still had double-digit inflation, that would not be a big deal 1/2ndash 3/4 but when inflation is two percent?

        “What's happening is we are paying for five years of extremely reasonable cost increases.”

        Other factors contribute as well. Advertising from pharmaceutical companies creates a consumer demand for drugs that are pricier. Also, an aging workforce carries the immutable force of demographics: older people get sick more often.

        The solution isn't really much of a solution. Consolidating plans helps. In 2001, 47 percent of companies offered three or four plan types. A year later, only 32 percent offered an array.

        “The takeaway is that there is no one single solution,” he said. “If you group the strategies and you get two percent savings from this approach and two percent from that approach, pretty soon it will add up to some real money.

        “It really is like a roller-coaster ride. Right now we are on the way up and just like a roller coaster on the way up, people have a sick feeling.”

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