Insurers see leveling off of costs in health benefits

Health insurance premiums rose dramatically in the latter part of the last decade, but insurance professionals are seeing a leveling off in increases in the past few months.

Statistics from William M. Mercer Inc. state that increases in 1999 were 7.3 percent on a national average and 7.6 percent in the Midwest.

Prior to that time, in 1995-96, southwest Missouri actually went through deflationary period in rates when managed care products were introduced to the area, according to Mike Scott, account executive for employee benefits, with Barker Phillips Jackson.

Spiked usage was one factor in the drastic increases in the mid to late 1990s, Scott said. Insurers did not anticipate the sharp increase in doctor visits when they initiated the low copay feature to HMO group insurance plans. People now tend to go to the doctor for every minor illness, Scott said.

Scott also noted that physician liability has added to premium costs, and increased visits coupled with higher costs per visit have affected rates across the board.

Also increasing insurance costs are government mandates that require carriers to provide group insurance regardless of pre-existing health conditions within the group. Benefits extend beyond the group umbrella with the Consolidated Omnibus Budget Reconciliation Act and the Health Insurance Portability and Accountability Act, Scott said.

COBRA allows individuals to continue coverage for up to 18 months after leaving a group plan at the same premium level as within the group. HIPAA provides that if the person then chooses to obtain individual coverage, he or she cannot be denied due to health problems.

According to Darren Coffman, president of Benefits Unlimited, although the cost may be prohibitive, under HIPAA the insured cannot be denied coverage if he meets three criteria: he comes from a group plan; has exhausted the COBRA benefits; and through no fault of his own, such as nonpayment of premium, is without health insurance. The law provides for a 63-day time limit to find other coverage after COBRA is extinguished, Coffman added.

Today, many people have gone from group coverage to self-employment or have chosen early retirement after age 55. HIPAA provides for guaranteed coverage for the individual who has lost his group plan and interim coverage before Medicare benefits kick in for the early retiree.

The choice can come with a hefty price tag if the individual has health problems. Scott cited as an example a couple who retired early and spend approximately $800 per month for joint coverage on a policy with a $5,000 deductible. He also noted an instance of another individual male in the same age group who pays $700 per month in premiums.

The HIPAA Bill was passed in 1996, and the provisions were gradually phased in during 1997 and 1998. Though the impact has been diluted by time, the law still remains a major factor in rate increases.

"When you have to cover certain things by law or have to accept any group regardless of health conditions within the group, it affects rates in general," Scott said.

Employers have a variety of choices of plans to fit their needs and budgets, Coffman stated. "Every plan has some employer contribution; it can be as low as 25 percent, though 50 percent is more the norm." In some cases the employer pays 100 percent of the employee coverage, with the employee responsible only for premium on family members added to the plan, he said.

According to Scott, within a group, typically the young female is the most expensive to insure and the young male is the least expensive. They cross at about age 55, he added.

By age 55 females are beyond child bearing and problems with the reproductive system have diminished.

Males are often just beginning to show signs of wear. In general, women are more diligent about going to the doctor for examinations and usually more health conscious. Men tend to eat less healthily and only go to the doctor as a last resort.

Some smaller companies with two to 50 employees have opted for medical savings accounts plans to keep costs down, Coffman said. With these plans the company buys high deductible coverage and a supplemental savings account is set up to help cover the deductible.

Coffman cites utilization, state-mandated benefits, federal regulations and the increased cost of prescription drugs as the major thrusts in driving up costs up during the last few years.

Pharmaceutical costs have jumped primarily due to technology, research and advertising expense, he said.

Scott said that pharmacy benefit managers have devised a three-tier program as a way to encourage policyholders to buy less expensive drugs. The insured pays a lower copay on generic drugs, followed by name brand drugs. The highest cost to the insured is on non-formulary name-brand drugs.

Coffman and Scott agree that drastic increases brought on in the late '90s have started to subside, although rates continue to climb as costs go up.

"Right now I'm starting to see a leveling off," Coffman said.