A recent report by a national research group shows in 2001, employers have been faced with the highest health premium rate hikes since 1992 and can expect to pay even more next year.
Businesses surveyed say they are likely to pass on the higher costs to employees. Others are expected to scrap health coverage altogether.
“Health costs are rising while the economy is sputtering, and it looks like workers are going to pay the price,” said Drew Altman, president of the Henry J. Kaiser Family Foundation, the Washington D.C.-based nonprofit group that conducted the health premium survey.
The national survey, which included 2,734 private and public firms with three to more than 300,000 employees, sought to identify trends in health plan enrollment, coverage and costs.
Among the trends were double-digit increases between the spring of 2000 and this spring with the smallest firms (between three and nine workers) seeing the highest average premium increases of 16.5 percent.
Employers attributed higher prescription drug spending, rising hospital and doctor fees and better technology as the driving forces behind the premium hikes.
With employment still high in 2001, many employers did not pass on costs to employees.
The majority of employers said the economic downturn and premium inflation raised the need for employees to chip in, said Larry Levitt, director of Changing Health Care Market at the Kaiser Family Foundation.
Levitt predicted, “(In 2002) workers will be likely to pay more for insurance and get less.”
Some employers have already boosted deductibles and co-payments. Valerie VanDeweghe, benefits manager for the city of San Diego, who participated in the survey, said as July the city’s 9,500 employees started paying more to cover family members.
VanDeweghe said the city was faced with annual premium rates hikes between 11 percent and 15 percent.
Kaiser Permanente, one of the HMOs offered to city employees, raised its annual premium rates by 11.6 percent.
That translates into $220 in higher annual premium rates per employee and $443 more for employees with two or more dependents, VanDeweghe said.
So far, employees covered under the Kaiser plan enjoy free doctor visits and pay $5 for prescription drug costs.
That may soon change, she said.
Employees at Science Applications International Corp. in San Diego will also dig deeper for health insurance, said Ken Wechsler, director of compensation and benefits at SAIC.
The technology firm hasn’t raised health premium rates in 10 years, Wechsler said.
Next year, though, SAIC workers will pay $5 more or $15 per doctor visit and dig deeper into their pockets for certain drugs.
Wechsler didn’t want to give a figure for premium rate hikes. He said, however, that deductibles for some plans will jump to $750 from previously $300.
The national trend shows a shift from Health Maintenance plans to Preferred Provider plans.
But in the state of California, where HMO penetration is among the highest in the nation, managed care will continue to be a stronghold.
Levitt explains, “HMOs have a much longer history (in California) here and we are much more accustomed to them,” he said.
Cost is a major factor.
In 2000, the national average monthly premium for a family of four was $538 for a PPO versus $487 for an HMO.
By contrast, in the state of California a family of four paid an average of $613 in monthly premiums versus $423 a month for the same amount of people under a PPO plan.
“Because PPOs are so much more expensive in California, it would be a much harder decision for someone to leave HMO for a PPO plan,” Levitt concluded.
The biggest surprise in the survey was that 40 percent of employers saw government regulation as a “very effective” way to control drug costs, Levitt said.
“(Typically) employers are pessimistic about any approach to control drug costs,” he said.
“This is a sign of how frustrated businesses are in what’s going on.”
Levitt said no one seems to have a viable solution to control health care costs.
Small-business owners are likely to be affected the most by the steep premium hikes.
Many may no longer cover their employees. This, in turn, will boost the numbers of uninsured making an already bad situation even worse. People without health insurance are known to wait the longest to get the care they need and often end up in emergency rooms, which is the costliest care in hospitals.
“In the early ’90s, when we were faced with the big increases, HMO wasn’t the magic bullet we hoped it would be,” Levitt said.
