What reform Insurance hikes hit a premium

September 3, 2010
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Businesses across West Michigan can brace for higher premium prices for health coverage as the busiest season for policy renewals arrives in the fall.

With estimates for premium price hikes ranging from 12 percent to 15 percent on average, the result could be a bigger bite out of paychecks as business owners grasp for ways to cover the costs.

“It’s just the fear of the unknown,” said Jamie Mills, president of Mills Benefits Group. “I think for the next three years — for ’11, ’12 and ’13 — we’re going to see huge increases. It is an opportunity for the insurance carriers to make some money.”

By Labor Day, many companies with health plans that must renew for Jan. 1 — a common cycle — are either already working on it or are starting the process, Mills said.

Scott Lyon, vice president of small business services for the Small Business Association of Michigan, said he believes medical inflation is the major culprit behind premium increases that he thinks will be starting at around 12 percent.

“There’s really no relief in there (health care reform) for the business community; in fact, there’s upward pressure on premiums in some of the things that are required under the Patient Protection and Affordable Care Act,” said Lyon, whose organization provides access to Blue Cross Blue Shield of Michigan health coverage for its members.

Under the PPACA, a set of reforms is slated to go into effect starting with policy renewals effective as of Sept. 23, which is six months after President Barack Obama signed the bill. Those include:

  • Coverage for adult children up to age 26.

  • Elimination of annual and lifetime caps on benefits.

  • First dollar coverage for preventative services.

  • Temporary re-insurance programs for retirees who are too young for Medicare.

“They are all little nicks, but they all add up over time,” Lyon said. “And then you combine that with just the general medical inflation that we are seeing that is still running about 10 or 12 percent, and you can easily get to premium increases that are double digits on up.”

Rick Byrne, Michigan market analyst for Nashville firm HealthLeaders-InterStudy, said in a report earlier this year that while those measures are likely to push rates up, insurers here are well-positioned as many already include those items in their policies.

“The impact will likely be smaller in Michigan than other markets since employers there have long demanded more generous benefits, which health plans have delivered,” Byrne stated in his report. “Removing lifetime and annual caps on benefits drew little complaint. Most already had generous availability to cover dependent children.”

Those health care reform provisions likely add just 1 percent to 2 percent on average to premium costs, said Kirk Roy, director of the office of national health care reform for BCBSM.

“Medical inflation, the cost of care, services that are utilized, new technology, aging of the population — all of those things swamp any of the specific benefit provisions that are in the law, particularly the ones that are effective at the first of next year.”

Joan Budden, chief marketing officer for Priority Health, said the Grand Rapids-based insurer has developed a set of alternatives for businesses to consider.

“I will say that we will have a range of increases and some of them will be high on the small group side,” Budden said. “What we’re doing for all small groups (is), when we give an increase, we will give them a choice of other options. We are trying to come out with a suite of products that will hit every price point. If somebody is going to get a big rate increase, we’ve got a solution for them.”

The West Michigan market is dominated by Priority Health — majority-owned by Spectrum Health — and BCBSM.

Robert Hughes, president of Advantage Benefits, said that health plans that combine health reimbursement accounts with high-deductibles may be in for a bigger hit than others, perhaps as high as 18 percent on average. He said that high-deductible plans that use a health savings account, or nothing to mitigate the deductible hit on employees, are more likely to see premium changes of 6 percent or less.

In addition, self-insured companies are seeing strong increases in stop-loss coverage that protects them from high-cost cases, Hughes and Mills noted.

Hughes said he thinks the real impact on health care reform with come in several years, with increased numbers on Medicaid and cuts in government program reimbursements.

“That is the real sleeping giant,” he said.

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