Period of stable group health rates approaching end

The good news is that insurance premiums aren’t going up as much as they were a few years ago. The bad news, though, is that they are still on the rise, and local insurers are expecting them to get worse in a couple of years.

The 2007 Employer Health Benefits survey from the Henry J. Kaiser Family Foundation shows that insurance premiums nationwide for an average family of four increased 6.1 percent in 2007 compared to 2006. That increase is the smallest reported by the annual survey since 1999.

Though the Midwest’s premium increase rate mirrors the national rate, Missouri Department of Insurance spokeswoman Emily Kampeter said statewide premium increase data isn’t readily available because the state does not require insurance companies to submit rate-renewal data.

The local story

Chad Connell, vice president of Hollister-based Connell Insurance, said group health benefits increased 6.1 percent for his clients from 2006–07, while Benefits Unlimited President Darren Coffman said his clients’ premiums were up about 8 percent.

Though insurance companies don’t set the rates – those are set by insurance carriers and underwriters – agents such as Connell and Coffman do work with client companies to get them the most affordable custom benefits packages.

“Increases are inching up more to where it’s getting a little painful for the employers again, but it’s not as bad as I’ve seen in the past,” Coffman said, referring to the early part of this decade when U.S. premium increases averaged as much as 14 percent. “We’re coming off of a term of stable rates.”

Stan Robinson, manager of the corporate health department at PJC Insurance, said his clients are all over the board.

“I’ve had renewals with single-digit (increases), some in the mid-teens, and a couple that will be 25 (percent), 28 (percent), or even 30 percent higher,” Robinson said.

Robinson said that his company’s estimate for 2008 increases for preferred provider organization plans is 12 percent; the estimate for health maintenance organization plans, which tend to have richer benefits, is a 15 percent increase.

Carrier bandwagon

Some companies are doing what they can to avoid large price jumps, including searching for new plans and insurance carriers.

According to the Kaiser Family Foundation survey, 65 percent of companies shopped around in the last year.

That trend holds true for Coffman’s clients.

“I always gauge (premiums) by how many companies are changing from one carrier to the next, and I see again now a turn toward switching carriers,” Coffman said. “Although that’s not a good long-term strategy, I see it happening quite a bit.”

Robinson said he’s not surprised more companies are comparing prices.

“Because of the cost for these plans, they all want to look around in the hope that there’s somebody aggressive out there that has a similar price and benefits for them,” Robinson said. “I really think, with what they can afford, companies are reaching the end of their rope.”

Help for a bleak outlook

Though premium increases have slowed, the future isn’t promising, according to both Coffman and Connell.

“It’s about a three- or four-year cycle, and I think it’s about to go back up,” Connell said. “In 2008 and 2009, the increase will be higher – closer to where it was a few years ago.”

The Kaiser Family Foundation study shows average premium increases in the Midwest peaked in 2003 at 13.8 percent, amid a four-year period of double-digit increases.

Connell said the most common methods for keeping premium costs down are increasing what he called the “three biggies”: deductibles, office co-pays and prescription costs.

“That’s probably why the increase wasn’t as high this year,” Connell said. “I know even here in our office we increased our deductible to offset that.”

Coffman said there are other options as well, including health savings accounts – which have higher deductibles with lower premiums and allow employees to contribute money to an individual account before taxes – and health reimbursement accounts, which allow employers to put money aside to help employees cover medical costs.

“On some of the plans that are a few years old, health reimbursement accounts are keeping the cost down,” Coffman said. “Higher deductibles equal lower premiums.”

More employers also are offering wellness programs that promote healthier employee lifestyle choices, which help reduce the number of doctor visits and keep premiums down.

Even though premiums are still going up, the fact that they’re not as bad as they could be is something insurance companies are willing to hold on to in a somewhat bleak renewal rates market.

“It’s been a lot easier year on our agents to renew accounts – they’re not showing up (to clients) with huge increases like they were,” Connell said. “The public had gotten used to 15 (percent) to 25 percent increases, so when they see 5 (percent) to 10 percent, it’s not that bad.”