Health insurance costs remain top concern

Half of the respondents to SBJ’s 2005 Economic Outlook Survey rank health insurance among their top three concerns for 2005. Rate increase expectations have come down some from the 2004 survey, but still 68 percent are preparing for a 6 percent to 15 percent increase.

The strain of health insurance costs is felt by many companies, including local city governments. “Based on the history of the last three or four years, we will probably have another double-digit increase,” said Karen Robson, chief financial officer for the city of Willard.

Robson said some of the cost might get passed on to employees.

“Up to this point we have just absorbed that cost,” she said. “I believe in 2004, we raised our deductibles for the employees and that took care of some of the increase.”

Robson also indicated that other cost-saving measures are not out of the question when Willard renews its insurance in May. One option under discussion is banding with other town governments to combat higher costs.

Alan Kunkel, with the Ozarks Regional Economic Partnership, said a medical benefits consortium in development hopes to draw at least 1,000 employees. The program is based on a similar system that local school districts have used for several years to keep costs down.

“Every year, I’m sure the city of Willard and other small communities go to bid and they say, ‘What’s the best rate you can give me?’ and they don’t really have any power to negotiate,” Kunkel said. “When you have a plan that big with that many people, all of a sudden you’re on the radar screen and you can have a little bit of negotiating power with the carriers.”

Kunkel said an initial meeting of area municipalities, including Republic, Nixa, Willard and Rogersville, generated enough interest that a second meeting is being planned for the end of January or the beginning of February.

The situation for Willard and other towns is not unusual, according to Tom Montileone, president and chief operating officer at Barker-Phillips-Jackson Inc., a Springfield-based insurance company.

“It depends on what you read, but most of the things I’ve read point in the same direction: that most carriers are increasing rates anywhere from the 8 (percent) to 12 percent range,” he said.

Michael Fleming is vice president of operations for Golden Business Forms in Golden City. The Barton County company renewed its insurance plan in September, and costs went up 17 percent, of which the company absorbed 12 percent, Fleming said.

Although many employees in rural areas choose not to buy health insurance, Fleming said cost is still an issue.

“It’s one of the drivers that will lure more professional people,” he said. “I have seven managers and three salespeople on staff. From a professional perspective, it’s a recruitment issue for them, so I take it as a high priority for (people with) those job skills.”

Changing industry

Montileone said many factors play into the rising cost of health insurance.

“You’ve got the uninsured out there; they’re receiving care and that’s usually shifted back on to the general public,” he said. “You’ve also got … advances in technology. While they’re great and do allow people a better quality of life and to live longer, they’re actually much more expensive. So as technology increases, the cost for that new technology gets filtered down into the bottom line of the cost increases.”

He added that the increased use of prescriptions for treatment increases costs as well.

“As new drugs come on the market, again, they improve the quality of life but they’re usually very expensive, especially during those first years when they hit the market,” he said.

As the quality of care increases, so does life expectancy. Montileone said that also plays a role in increased costs.

“To a certain extent, the longer someone lives, the better chance there is that during that time they’re going to have some type of an injury or sickness, and there’s going to be a claim generated,” he said. “That will cause the cost of insurance to go up.”

The increased costs are causing some companies to change the type of insurance they offer, according to Montileone.

“What we’re seeing is there’s a gradual movement away from the HMOs back to the PPO-type products,” he said. “The PPO has more options available to the employer to be able to change benefits that basically lower the cost. It has a broader range of deductibles, co-insurance options, and things the employer can tweak to get costs down. But I think anywhere you look you’re going to see employers gradually cost-shifting part of the weight back on to the employee.”