Sunday, October 24, 2004
Workers bracing for insurance shock
Premiums rise, co-pays soar, families cope
By John Eckberg
Enquirer staff writer
As executive director of the Center for Local Government, Robert K. Johnson was surprised last year when he fielded dozens of calls in one week from irate city, township and village administrators from all over the region.
"They were telling me about their health-insurance renewals," Johnson says. "They were getting 10, 20, 30 and 40 percent increases. They were going nuts and didn't know what to do about it."
In response to its members' concerns, the center created a panel and came up with an innovative approach to reduce health-insurance costs. It brought 23 local governments under one umbrella to leverage their combined clout and deliver better insurance rates to the roughly 1,600 firefighters, police officers and other public employees.
Rather than individual units bargaining on their own, the combined effort saved the local governments and their employees an estimated $500,000 in increased health-plan costs in 2005.
The cooperative approach between the separate government entities, which are not known for such initiatives, shows how dramatic the problem has become and is one of a few bright spots in the effort to control skyrocketing insurance costs.
October is when companies traditionally sign up for new or revised insurance plans. Again this year, firms are braced for bad news: a fifth consecutive year of double-digit increases for employer insurance plans.
The cost of health insurance in the region ballooned by 18.4 percent in 2004 - the third-highest increase for a region in the United States - and experts project another 11 percent boost coming to companies in 2005, according to a recent report by Hewitt Associates, a global human resources consulting firm.
As firms respond to the increases by shifting more costs onto employees, workers are finding that higher premiums, deductibles and co-payments do not translate into better coverage.
Rick Gray, who works at Fairfield's Cincinnati Precision Plate Inc., knows that his employer has done its best to control costs, but he's still paying much more for health care than he paid even two or three years ago. His co-pays for prescription drugs have gone from $5 to up to $45.
Gray, who is on five or six medications for chronic health conditions, has seen his monthly cost jump from $30 to about $150. Because he is not insulin-dependent, his diabetes-monitoring supplies are not covered.
"If I checked my blood sugar as often as the doctor suggests, that would be another $80 or so per month," he said. "Consequently, I rarely check."
Workers can forget about offsetting health-insurance costs with cost-of-living raises, according to a new study from the Employment Policy Institute of Washington, D.C. For families with health insurance, real income gains were illusory between 2000 and 2003.
The rapid rise in premiums and out-of-pocket costs combined with weakened wages produced income drops of 1.3 percent for two-parent families, 2 percent for single-mother families and 1.8 percent for young singles. Elderly couples lost 3.8 percent, the institute found.
"It's ridiculous," says Beverly Mundy, 52, of Avondale, who retired last year from Cincinnati Public Schools after a 30-year career as a first-grade teacher and found that her insurance, co-payments and cost of drugs grew dramatically. "I go to the pharmacy and see the old people who can only afford 10 pills.
"That breaks my heart. Nobody in this country should be suffering because they can't get medical care. It just makes me mad."
Costs deliver a shock
Most companies and workers are shocked by the numbers, which have escalated by double digits since 2001 after seeing single-digit growth through the 1990s:
National health expenditures are projected to reach $3.4 trillion in 2013 - double the $1.7 trillion spent in 2003, according to the Office of Actuary at the Centers for Medicare & Medicaid Services.
Between 2001 and 2003, almost 9 million Americans younger than 65 lost employer-sponsored health insurance, according to a Center for Studying Health System Change.
The average cost of health insurance not sponsored by a company is $97 a month for a person under the age of 18 and $210 a month for people between 45-64, according to the Kaiser Family Foundation E-Health Insurance Report.
On average, employers spend $3,383 annually for coverage for a single person and $9,068 for a family.
Experts have no shortage of reasons for the runaway numbers: chronic diseases, an aging population, the rising price of prescription drugs because of expensive research and defensive diagnostic procedures ordered by doctors who want to avoid malpractice lawsuits. Other factors include unhealthy habits of many Americans that lead to obesity, addiction to tobacco and excessive drinking.
Chuck Slater, senior vice president and general manager of Anthem Blue Cross and Blue Shield, says two sets of numbers sum up the problem.
"Five percent of my insured generate 55 percent of the claims," Slater says. "Seventeen percent of the insured generate 78 percent of claims."
"We as a society have become gluttonous in our appetite for health-care service," Slater says. "We want it now. We want the best, and we want the most convenient."
Fred Pugh, chief executive of Bond Hill-based PC on Call, took his employer-sponsored health-insurance plan out for bids earlier this year and expected a modest rise in costs.
The computer-services company was told that it should expect a 2 percent to 3 percent increase but had to agree to a census of health conditions for its 72 employees that could change the quote.
Then, because of one employee's catastrophic illness, the insurer returned with a proposed 27 percent increase. The company had no choice but to reduce coverage and pass along rate increases, Pugh says.
"The company pays more. Every employee pays more. One person can turn you upside down, and that is absolutely insane."
Colerain enhanced benefits
By being part of the Center for Local Government's consortium, Colerain Township did not save on its health-insurance bill. Instead, the township increased benefits to about 120 full-time employees, which included the Fraternal Order of Police, said David Fogelsong, township administrator.
"It was a few dollars more for family coverage, but we now have a reduction in office-visit costs, prescription-drug cost, and we have higher insurance coverage," Fogelsong said.
The Center for Local Government plan hinges on three tiers of health-insurance coverage for its workers called diamond, emerald or tanzanite plans.
Rates vary in each plan for deductibles, co-insurance, out-of-pocket costs, office visits, inpatient and outpatient hospitals, therapy, urgent care, emergency room visits, prescriptions and even organ transplants.
For instance, the top or diamond option will pay 100 percent of inpatient hospital visits but has higher premiums while the lowest or tanzanite option pays 80 percent but only after a $1,000 to $3,000 deductible is depleted.
The consortium created the package in concert with David F. Rinderle of Kenwood-based benefits firm Cross & Associates. His comprehensive package of health insurance offered insurance choices to the 1,600 public employees in the umbrella group and their 3,900 family members. Any group with a large number of employees could create a similar set-up, Rinderle says.
"With a cooperative, you can make decisions from one group to another about how much risk you want to share," Rinderle says.
Another creative solution comes from Loveland-based insurance brokerage and consulting company Total Benefits Planning, which promises it can save companies 20 percent to 80 percent on health-insurance premiums.
The firm uses an obscure corner of the federal tax code - Section 105 - to create reimbursement accounts and other tax deductions for companies and more affordable insurance plans for employees. The company reimburses the employees for co-pays or other costs and gets a tax deduction for it.
Tom Quigley, president of Total Benefits Planning, believes the answer to keeping down health-insurance costs lies in multiple plans that allow employers to target specific medical procedures with specific insurance policies rather than buying one big plan to cover all contingencies.
For instance, a complex arrangement of multiple policies known as gap insurance may allow single coverage for employees' dependents and separate single coverage for the worker, while the total deductible stays at $500. Savings occur because insuring children costs less than insuring higher risk and older employees or a traditional family policy.
The Section 105 approach also allows companies to deduct from income the expense of gap insurance, medical products and office visit co-payments.
That deduction translates into significant savings, Quigley says: "A lot of times, benefits are actually enriched."
Randy Gebhardt, chief operating officer of Columbus-based Quantum Health, says his company's approach keeps increases at client companies to about one-third to half the national average rate.
"Our clients, who are mostly self-insured employers, have seen a 6 percent annual increase," Gebhardt says.
Quantum coordinates coverage and reduces the number of duplicate procedures. In turn, bills fall.
"There may be two or three physicians, a hospital, a nursing facility, and information gets lost between these players," he said. "The family gets confused and there's waste and delays."
Quantum, which is beginning to target small companies and agencies in Greater Cincinnati, provides a staff of care coordinators - nurses and social workers - who in turn work to eliminate unnecessary and sometimes repetitive procedures.
Anthem's Slater said there are no easy answers for insurance companies, either. As a senior insurance executive, he reviews all claims of more than $100,000. It's his way of staying in touch with costs and claims.
Last week, he says, one claim came across his desk for a now-deceased patient of a specialty cancer hospital.
"The person was admitted Aug. 19 and died on Sept. 13," Slater said. "The size of the bill was $1.9 million.
"That's a lot of money for somebody who was deathly ill. I'm not making any judgment, only to say it happened. But that's what's being overlaid over our health-insurance programs."
The following governments are members of the Center for Local Government's Health Insurance Benefits Cooperative:
Amberley Village, Anderson Township, Cheviot, Colerain Township, Delhi Township, Deer Park, Fairfax, Fairfield, Fairfield Township (Butler County), Forest Park, Glendale, Greenhills, Green Township (Hamilton County), Indian Hill, Loveland, Milford, Mount Healthy, Reading, Silverton, Springfield Township (Hamilton County), Sycamore Township, West Chester Township and Woodlawn.
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