Health premium hikes in sight for 2009

November 7, 2008
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Price increases for group health insurance premiums for 2009 are averaging in the range of 6 percent to 11 percent, industry professionals say, and in some cases, premiums are even decreasing.

At many companies, employees are signing up now for coverage that kicks off Jan. 1.

“Generally speaking, there’s good news” for fully insured companies with fewer than 100 employees, said Jim Kenyon, principal of Pinnacle Insurance Partners.

The lowest increases and price drops are coming in high-deductible health care plans, said Robert Hughes, president & CEO of Advantage Benefits in Grand Rapids.

“A lot of our clients in the past few years have moved to high-deductible health plans. We are seeing decreases on many of them, and 3 to 4 percent increases on the rest,” Hughes said.

He said insurance companies are fine-tuning the pricing of high-deductible products, introduced just a few years ago. Higher out-of-pocket costs associated with those plans are prompting consumers to shop around, in particular for prescriptions, he added.

“A lot of insurance companies didn’t really know how to price them because they were so different,” Hughes said. “I think some of them overpriced a little bit, but also the experience from covered individuals actually acting like consumers. These plans are actually working and people are changing behavior a little bit. We are seeing decreases for many of our customers that have the high-deductible health plans, or below-market increases.”

Kenyon said most of his small business customers are now using high-deductible plans and pairing them with health reimbursement accounts to cushion employees from suddenly higher out-of-pocket costs.

“It’s worked phenomenally well,” he said. “In my book of business, most of my customers have gone that route already. I have yet to have a customer go upside down, and that is, spend more money on the reimbursement of those bills than what they saved in premiums.”

People are only starting to think of themselves as health care consumers, Kenyon added.

“I think they’re beginning to acknowledge they need to be engaged. They don’t know where to go to get more information. It’s going to take awhile for that whole consumer engagement to come to fruition,” Kenyon said.

Priority Health CFO Greg Hawkins said the recent economic turmoil has had little impact on premium prices. He said the nonprofit insurer, primarily owned by Spectrum Health, has minimal exposure to the stock market, concentrating on bonds, money markets and certificates of deposit.

“We overall anticipate that our rate increases will be in the single digits, in the range between 6 and 9 percent,” Hawkins said. “That varies based on product design, size of employer and, to some extent, geography. We believe that is lower than what we’ve seen with national trends.”

For fully insured Blue Cross Blue Shield of Michigan customers, average premium price hikes are 7 percent for next year, said Jeffrey Connolly, president of West Michigan operations. Customers of HMO Blue Care Network may see an average increase of 6 percent, he added.

“The last three or four years has been fairly consistent from a Blue Cross, BCN perspective, and we anticipate those trends to continue,” Connolly said.

“Given the economy, employers are changing their benefit structure. The trend continues toward more of a wellness push. The accountability of taking care of one’s self continues to be a theme. As individuals get healthier, that helps stem the premium.”

Maggie McPhee, director of information services for The Employers’ Association, said that with Blue Cross Blue Shield of Michigan and Priority Health dominating the West Michigan market, 52 percent of the 156 employers surveyed by TEA offer employees only one health care plan, she said.

“The whole world is kind of frozen till after (the election),” McPhee said. “I think everybody’s kind of sitting tight. They’re just tweaking plans, not shifting a whole lot. If I’m hearing anything, it’s that we don’t have a whole lot of choice around here.”

At Grand Valley Health Plan, the state’s only staff-model health maintenance organization, average premium price increases are 7 percent for 2009, President & CEO Ron Palmer said. However, costs are going up 9 percent, he said.

“What’s happening is that 2 percent is being moved over to employees and usually being moved by higher deductibles or co-payments,” Palmer said.

Palmer is pessimistic about whether high-deductible plans are encouraging consumer behaviors in health care.

“The idea that the middle-of-the-road, average consumer out there could possibly rationally buy health care right now is terribly misinformed,” Palmer said. “That’s really unfair right now. Nobody has been pricing products for an open market. Consequently, the consumer is in a maze.”

A study released in October by the Blue Cross Blue Shield Association found that people with consumer-driven health care plans were 30 percent more likely to track their health expenses and 27 percent more likely to ask doctors about the cost of treatment.

Larger firms that self-insure for health care are finding average premium increases for stop-loss insurance, with one carrier instituting particularly large hikes, Hughes said.

Under those policies, the company covers health claims up to a pre-determined amount, and the stop-loss policy then covers the extraordinary costs.

“The good news is the reinsurance numbers we’re seeing out there are holding in the 7 (percent) to 9-ish range,” Hughes said. “It’s not as low as we’d like to see, but they’re not blowing up.”

Priority Health is entering the stop-loss market itself in 2009, Hawkins said. Previously, Priority Health worked with other insurers to provide stop-loss coverage for its self-insured customers, he said.

“We believe there are opportunities, and it’s what the market is demanding,” Hawkins said. “It’s a smaller component of our business, one we anticipate a great market share for in the future.”

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