Reader Responses September 5, 2002

SURVEY SAYS: Readers Share Their Healthcare Cost Experience

May 9, 2002 (PLANSPONSOR.com) - This week, we asked readers what kind of healthcare premium increases you're coping with - and what strategies you might be using to deal with them.

Reported by

Nevin E. Adams

Well, things seem to be even worse than we’ve read – a whopping 52% of our survey respondents say that they are having to deal with healthcare premium increases of more than 15% ( ‘way in excess of 15%’ , according to one reader). In fact, that number would have been higher, but for creative approaches and program changes by a number of respondents. Still, it appears to be a losing battle for some. One reader noted, ‘we’re coping with a weighted average of 32% for cal year 2003, making this year’s modest 20% look quite attractive.’

Over a third ( 36% ) are dealing with 10-15% increases, while roughly 12% have managed to keep the increases below the 10% level.

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‘It is out of control.’

Even the medical profession is nonplussed, according to some respondents. ‘…as folks in the industry, we are as perplexed as anyone about what is happening, because the premium increases certainly aren’t ending up in physicians’ pockets. Our sense is that with a rapidly growing national problem with professional liability insurance, the state of our health care delivery and financing system is precarious, at best.,’ according to an orthopedic surgery practice.

A number of readers were good enough to share their hard-fought experiences with us – many have changed providers, upped deductibles, introduced tiered programs. One noted ‘The short answer is we deal with healthcare premium increases through education and pain sharing.’

A couple of readers suggested that workers themselves might be part of the problem. One notes, ‘…what might get us a step closer is if we can convince our employees that it is imperative that they take control and responsibility for their health. They should go for a physical each year. They should listen to what their body is telling them. They should take their meds to lead healthier life….’

Another noted, somewhat more directly, ‘The REAL issue is: how do you tell employees that they are overweight and smoke and drink too much and that’s really why our costs continue to increase!’

But perhaps, in view of the increases reported, it should come as no surprise that this week’s Editor’s Choice was a reader who simply said – ‘It is out of control.’

Thanks to everyone who participated in our survey!

The question was: what kind of healthcare premium increases are you coping with - and what strategies might you be using to deal with them?

THE VERBATIMS

Our health insurance premiums went up 31.7% this year. At least for this year, we've just increased employees' contributions. Next year, given another "whopping" increase, I suspect we will increase deductibles, copays, etc. Where will it end??

We will be increasing co pays by employees.

The answer to my health care increases is (c). Specifically it was 12.4%. Actually, my prescription benefit only increased by 8%. This is a heavy push towards generic drugs.

Regarding the plan in whole, I am self-insured. In order to keep my costs down for the next year, I've increased my stop loss by $10,000 per covered individual. Also, I've increased individual and family deductibles by $50 each and changed the co-pay structure on my prescription card. Also hurting me are the skeletons I have in my closet. I've had a three - four employees who've exceeded the stop loss amount in previous years and their illness are those that could recur. So, I am damned if I cover them and a cold callous SOB if I don't.

This past year we saw 20-25% increases on just about all of the HMO's offered at various locations as well as a 20% increase in our self-insured plan expenses. We put in a 3-tier drug program (generics, preferred brands, and non-preferred brands) to help contain prescription drug costs and we have initiated such programs as spousal/dependent carve out to push dependents to other employers' plans as well as paying for opting out altogether.

Our company was utilizing an ASO contract that for 10+ years was extremely good -- two bad years sent us shopping (definitely the D category). Our employees were paying $5.00/week for health/prescription/dental but we could no longer absorb the increasing costs. We sent out a RFP to 10 different companies-- HMO's, PPO's, POS's and standard indemnity. We have approximately 185 employees coast-to-coast and wanted one plan to fit all. We opted for a PPO for the health and prescription, which is a higher cost but better coverage. The dental is a self-funded program with specified limits. Employees are paying 20% of the cost that runs through a cafeteria plan. We also have flexible spending accounts.

More importantly than what are we doing is what is our philosophy and how will it be shaped the companies going forward. Two years ago we tweaked the plans by shift some costs and responsibility for care on to the employee. As costs go it was minimal with deductibles going from $200 to $250 and out of pockets moving from $1200 to $1250. The direct cost with the employee
was moving from a 90% employer paid premium to an 80% which as been staged
in. This year we will have the 80/20 split.

We are now taking another fresh eye at the subject and like many others wonder how much we can shift or want to shift on to our employees. For this year we are bringing forward a strategy to reduce the number of insured plans, we current offer and add a Defined Contribution for those young employees who never see themselves a getting sick. Our self-insured products are quite good and the penetration for physician and hospitals are good as well. So, do we really need to supplement with insured products that cost are exploding in and cannot be controlled by the company directly.

Probably not. However, what perception and actual changes will the employee experience? They may feel they are losing something that is very valued to them. They do not like change as much as we press it upon them. Some may lose their physicians or have to pay more for out-of network services. All not a good start to accepting change.

Is there a perfect world? No. We all know that there is not one insurer or TPA who can deliver the whole world and guarantee no disruption in services by network that now want to flex their muscles. The employer is coming into hard times regardless which direction they go.

What might get us a step closer is if we can convince our employees that it is imperative that they take control and responsibility for their health. They should go for a physical each year. They should listen to what their body is telling them. They should take their meds to lead healthier life. Can
we bring that impact to the organization? Yes, I have seen it. When an executive finds they have a very serious condition, it becomes a top priority to education, but you can't always count on someone at the top stepping up to the plate.

This was certainly more than you wanted to know, but in the coming years I see no win-win situation for the employer.

While we are self-insured, we had budgeted an 11% increase in costs for 2002, and we seem to be running true to budget. Currently, the Company pays 75% of the cost, and the employees the remaining 25%, so if our costs go up 11%, theirs do too. For 1/1/02, we also increased our co-pays for office visits and prescription drugs.

However, I am not alone in feeling a sense of dread about 1/1/03 HMO renewals. While we won't get those numbers for a couple of months, a reliable harbinger is CalPERS, and theirs came in at 25%!!!!! This scares most of us in benefits, as they have huge leverage with their hundreds of thousands of covered members, and they are usually able to keep their increases several points lower than the rest of us. What will the future hold, and how can companies deal with it, while still offering a true value to employees????

Many companies are looking at things that, at the end of the day, just cost shift to employees, many of whom are not able to pick up the increased cost, and therefore will neglect care. In the long run, this strategy will backfire, I think, as costs will explode, and there will be a backlash against companies shifting cost to minimum wage earner employees, who are still uneducated and unsophisticated healthcare consumers. Some companies are trying to get information out there to make employees more educated, figuring they will then made better healthcare choices and decisions. But while you can lead a horse to water, you can't make him drink, and the same applies here.

Bottom line: The steps, big and small, that companies take to try to deal with these significant cost increases, are only stop-gap measures, putting band-aids on a huge problem, and there are leaks everywhere. It will take a major change in the delivery of health care in this country to effect the kind of control on costs we all need. Unfortunately, with the political system that exists, and with the raw memory of how poorly treated and ridiculed the last brave souls were who tried to make a full-scale change in healthcare delivery, we will all go through a lot of pain, high costs, ranting and raving, before someone will have the courage, and support, to go down that path again.

We offered the same insurance for 10 years, until the provider was "acquired". During the acquisition, service went down the tubes. We bounced around for 2 years, thought we had found a home, and then got hit with an increase of (d) over 15%. We had to go elsewhere. Our employees are perpetually confused about coverage. I've had a headache for 4 years. I want to go back to a kinder gentler health insurance time. (1992?) We may have to consider upping the employee-pay percentage.

Our increase was 10-15%. The initial quote from our insurance provider was significantly more than a 15% increase. We were able to lower the increase by changing (i.e. increasing) the employee contribution and changing the co-pays for our prescriptions, office visits and ER.

Our health plan costs are expected to jump over 15%. Some strategies being used/considered include, 1) health risk assessments with premium differentials for those that participate, 2) considerable cost shifting, 3) defined contribution models, 4) increases to prescription drug copayment levels, 5) shrinking retiree benefit levels, 6) reducing the overall number of employees eligible---possibly take this benefit away from part-time employees.

Without any action we anticipated 16.5% for our self-funded PPO plans and a range of 10% to 50% for the fully insured plans (25% of total).

To solve the unacceptably high projections we changed the Co-Insurance in the PPO's on the In-Network side from 100% to 90% and went to 70% from 80% out of network. Two other PPO's were already 70% out of network.

In addition we moved the office visit co-pay to $15 from $10 and RX brand drug co-pay to $15 from $10.

Notably, we did not raise employee contributions on top of the changes above which would have even further increased the out of pocket employee cost-sharing. Current employee cost-share is about 20% of premium in payroll deduction contributions.

Result was we project no more than 10% increase overall for healthcare this year but the changes were drastic in a company that does not hit the employee hard for these programs.

Healthcare premium increases are in the 10-15% range. The company is considering unbundling benefits, increasing deductibles and co-pays, and charging a higher co-pay for specialist services

Our health care plan increases are (b) 5-10% for the last year. We have increased the co-pay for the office visit to $15.00 and increased the prescription co-pay to $15.00 generic and $30.00 for name brand.

We are way past d) so far this year. In the past three years we have tried more managed care, shifting more costs to employees, disease management, educating employees about cost drivers, etc, etc, etc. Because of our moderate population size and dispersion throughout the country, it is considered inefficient to try to implement a significant (which means monetary incentives) wellness program throughout our population...which is unfortunate, because I believe that changing employees' medical care usage, eating and exercise habits is the only way we will reduce the trend.

We are dealing with increases far in excess of 15%, and unlike past years, are having to pass most of the increase on to employees. We're trying to educate our workforce about the costs of sponsoring a medical plan, and encouraging them to take part in holding down claims costs. However, the traditional HMO/PPO environment doesn't offer much incentive to employees to control costs. Therefore, we are strongly considering a Consumer Directed Health Plan for 2003.

Our increases have fallen in the 15% range for one company with 17 employees. Our other company with 130 employees has received 13% increases. We have had no choice but to raise co-pay amounts for medical and prescription services so we can lower our plan costs. We have an employee whose spouse has muscular dystrophy (which is considered a catastrophic illness). When we look at other carriers at renewal time, we see lower (or same) rates from competitive carriers.

However, once we disclose the catastrophic illness, carriers can then increase their proposed rates up to 67% (which is what we experience). While we are happy with our current carrier, if that should change, our new rates would be at least 67% more than we are paying now. So, what insurance companies are really saying is that they only want to cover healthy people. Almost sounds a little discriminatory. I'm hoping we will start to see more companies like Destiny Health who can offer a little creativity in benefit design while managing to keep premium costs down.

Our health care costs have risen in excess of 15% in the last two years (last year was over 20%) and in the 5 - 10% range each year in the 5 years prior to that. Years ago we would switch carriers for a "better price" but soon found out that the "better price" was bait for the switch only. When it came time to renew, the increase was always so substantial that you would have been just as well off to stay where you were, and the employer and employees would not have to deal with the myriad of problems involved in any switch.

We are a small software company with 23 employees and truly feel "helpless" when it comes to our health care insurance.

We have experienced increases the past two years of 20% and 25% in our health care premiums. We employ approximately 325 employs, and most are fulltime employs and eligible for health care coverage.

This past year we negotiated with our provider to offer a plan with greater co-pays, and greater employ cost sharing. For the first time in many years, we offered our employees two plan options:

1) The "premium" option required higher employee premium contributions, but had lower "risks" in the amount of "out of pocket" costs.

2) The "standard" option offered lower employee premium contributions, but had greater "out of pocket" "risks".

70% of our employees preferred the "higher premium" option and chose to avoid the potential "risks".

We held small group meeting explaining the benefits. These were conducted by our CEO, HR, and myself (CFO). We felt the message (although bad) would be better received by our employees if it came from persons within the organization, and not from Humana.

Funny you should ask this....I just signed the renewal form on Monday. As a small business we were hit with an 11% increase in health insurance premiums, which I was repeatedly, reassured that this was a very, very good deal. As an alternative we were offered options with much less coverage for the same premium we were paying last year or a variety of lesser plans with slightly reduced premiums.

Since we have historically paid the entire premium for our employees, we will continue to do so. However, we do make it very clear to each and every employee what we are paying so that they appreciate the value of heath insurance. In addition, we really encourage employees to seek medical care when warranted because our plan is very generous.

It should be noted that as a corporate policy, we do not have "sick days". Each employee has an allotment of "personal leave" that can be used for any purpose including vacation, childcare, illness, etc. We feel that this is fair given our commitment to our employees' health care.

We're coping with a weighted average of 32% for cal year 2003, making this year's modest 20% look quite attractive. In our "politics over business" strategy, we continue to charge both our employees and retirees only $25/mo for their monthly premium co-payments.

We received a 15% increase for our NY plan and a 46% increase for our national plan. I managed to get the 15% down to 8% with a change in plan design, but I'm running out of things to change.

We changed carriers for the plan with the 46% increase but still had to pay 18% over the existing premium. We ask very little from our employees in terms of contribution to medical - approximately 10% of premium.

At open enrollment this year we asked our broker to emphasize the issues driving up healthcare costs such as demand for 'designer drugs' and doctor visits for trivial reasons. The REAL issue is: how do you tell employees that they are overweight and smoke and drink too much and that's really why our costs continue to increase!

We are having over 15% increases. We are passing some of the increase along to participants. My POS plan is reducing the payments to doctors causing the doctors to get out of the plan. So, we're coping by paying insurance companies more for less service, may they rot in…

We're a self-funded plan with about 1000 participants. After holding employee costs level for 4 years (and the employer side picking up increases/deficits), we've raised employee costs 42% at one fell swoop. We're also making plan design changes to cost shift to plan users through increased deductibles, co-pays and out-of-pocket maximums.

Our experience last year blew us out of the water with more claimants going through the specific re-insurance point ($125,000) than ever - and our experience so far this year is no better. Attributed to: higher medical costs, larger number of claims, more aggressive treatment plans, prescription drugs.

For 2002 our company raised our cost for health insurance 20%. Plus co-pays for virtually every health service have gone up. My husband and I have small children and the medical expenses, between co-pays and premiums is staggering.

We continue to have increases in the 12-13% range. We're self-insured and having a relatively good year. I guess it happens once in a while! Maybe we'll be able to hold to a 12-13% again, but employees won't be especially happy because when the price increases, they expect more coverage, and, likely, will get less. No win win here!

We use HMO/POS plans at virtually all of our 25 U.S. locations. Our health care costs would have increased about 15%+ on a nationwide basis in 2002. . We held the premium costs flat (for both the 80% paid by the Company and the 20% paid by the employee) by: 1) increasing PCP copays from $10 to $20, 2) increasing Specialist copays from $15 to $25, 3) increasing in-patient hospital copays from $0 to $250, 4) increasing outpatient hospital copays from $0 to $100, 5) increasing ER copays from $35 to $50, 6) moving to a more restrictive Rx formulary and a more restrictive pharmacy network, 7) inducing the use of generic drugs - if Doctor permits generic and member purchases brand, the member pays the full difference, 7) increasing mail order copays for a 90 day supply from $20 generic / $50 brand / $80 non-formulary to $25 / $60 / $100 (retail copays remained at $10 / $25 / $40), 6) mandating mail order for maintenance drugs after getting Rx filled 2x at retail.

Our health care costs have increased by 7% from last year. Up until October 2001, the company was paying 100% of all employee premiums. Since then we have passed on some of the cost to the employees, splitting it 50/50 with deductions being made on a pre-tax basis. Some employees dropped the plan but overall it has saved the company money. I personally believe the company should go 80/20 with the employee contributing the latter so that employee satisfaction would increase a bit. What are some other suggestions?

Our health and prescription drug claims are running over 15% and we have been forced to respond with higher premiums and high prescription co-pays.

Our health care premiums went up 50% this year. We had to increase co-pays and deductibles to bring them down a little. It is out of control.

10-15% for the PPO Plan, 25% -HMO Plan, higher deductibles, higher copays for office visits and higher copays for prescription drugs

Ours is more in the (b) 5 - 10% increase level for the year. The strategy has been to start passing increases on to the employees by increasing the part they pay. This year a plan was established for annual increases on the employee paid part of the premium. This plan is not tied to the premium increases the company incurs. It was decided that it is important for employees to become accustomed to annual increases (this as opposed to the idyllic world we go home to each day where every desire is delivered free, and in pairs to our front door with the twitch of a nose).

Costs for coverage are increasing but we manage to keep the larger part of our work force at pay levels a little under the industry average. It's tough to keep good people on staff long enough to keep things going with under average pay and this really won't help. As far as health coverage many employees seem to request that everything be covered which is not realistic either. Is it common for employers to offer a basic plan fully company paid and then a "plus" package that is picked up totally by employees who see the need?

Last year our healthcare premium increase was (c) 10-15%. However, we just had our mid-year review and this year looks to be (d) over 15%.

Last year we modified our plan a little to keep the increase a bit smaller. We split off our dental (now non-parallel), increased the copays for prescriptions (3-tier program), and other small changes. We also had to pass part of the increase on to the employees.

d. over 15%

Self insuring for most losses with stop gap loss limits for big losses

Our health care premiums rose about 23% (after an initial renewal proposal of more than 30%) and we chose to increase deductibles and co-pays as well as the employee contributions to the cost. Our employees pay on a sliding scale according to their incomes, with the highest paid shouldering almost the entire cost. We value our insurance program and are willing to pay for the coverage and so we have not heard too many complaints about sharing the cost. Employee contributions are made on a pre-tax basis and we also sponsor flexible spending accounts, which help ease the burden.

Our healthcare costs are definitely growing faster than the costs of our other benefits. In the mid-90s our costs decreased when we went from self-insured to fully insured with an HMO. Then in the late 90s to now our costs have been increasing more than 15% per year. We do have an excellent insurance broker who has a good handle on the healthcare/insurance picture for our area, so we know that our costs are not out-of-line compared to costs for this region. We do charge our employees 30% of the cost, and we have been raising the co-pays to keep the premiums down.

Healthcare premiums: over 15%, AGAIN. Options: a gradual increase in cost-sharing, we think we're under market; self-insured analysis; prescription carve-outs; more audits --active employees (for ex: proof of dependency), insurance and TPA records, etc. Benefits costs are also considered more when making business decisions -- office moves, etc. Benefits staffs have as close to "job security" as possible in this era!

Health Care Costs are increasing from 12-15% on average, just about what one would expect with the government (in this case many layers starting with the Feds but also heavily supported by the State) polls making rules for the industry, legislating benefits and mandatory coverage, legislatively defining and expanding costly experimental treatments as routine practice whether they make sense or not, increased drug mandates and otherwise making the service industry less efficient. Don't forget the packs of legal hyenas roaming the corridors under the domes of government. There is no free lunch except in Sacramento and Washington for legislators feeding at the trough showered by perks from special interest groups.

HealthNet is an option in our healthcare benefits choices (outsourced to TriNet). The premiums increased 40% year over year. I guess CalPERS has been able to hold their HealthNet increase at 25%! These numbers seem outrageously high!

Regarding healthcare premium increases, we have two plans renewing on July 1, 2002. The increases are 3% and 3.5%. Our dental plan is separate and we will see a 25% increase in rates. Currently, we pass on a portion of any increases to employees in higher premiums (Company pays 80%, employees pay 20% of premium cost). We continue to shop around each year to see if lower rates are available with other carriers. In addition, we are seeking more detailed information on employee healthcare usage. Our intent is to address areas of high usage with communications and wellness programs that would change risky behavior such as smoking, obesity, etc.

Our employee coverage increased 11%, dependent coverage went up 16%. As has been our policy forever, the firm pays the employee, the employee pays the dependent. Unfortunately, our dependent coverage is so expensive only the senior partners can afford it. I keep business cards in my drawer to give new employees who want dependent coverage. The business cards are from a lady who sells individual policies cheaper than our group coverage. As one of my employees so aptly put it: "With the money I save getting individual policies on my family, I can buy a new car." This is sad but true. Thank God my family is all working and covered by their own employers.

Our increases averaged 10-15% for 2002. We had one HMO renew at a wonderful 6%, and another renew at a terrible (to us) 18.7%. Our average for 7 HMOs was 11.8%. All 7 of our HMOs are regional, so not everyone is offered an HMO option.

Our self-funded PPO is expected to reduce by 4.2% because of plan design changes implemented, particularly increases in prescription drug copays and increased premium cost sharing. Some of the HMOs also experienced plan design changes, some mandated by the HMO, others adopted by us in order to buy down the renewal increase.

Right now our PPO is running more efficiently from a cost standpoint than all but one of our HMOs, so I expect we will take a hard look at our more costly HMOs for 2003 and either adopt plan design changes or drop that HMO option for the coming year.

Our healthcare premium increases will be in excess of 15%....... way in excess of 15%. Our business is part of a large corporation and the costs for healthcare. My strategy is to convince others that we need to put some basic cost saving measures in place (which has never been addressed previously). Such as increased co-payments for medical and drug (ours are $10), increase employee monthly costs (ours are extremely minimal), increase out of pocket and deductibles etc.

The issue certainly strikes at our little outfit, a 10-doctor orthopedic surgery practice with 25 FTE employees. In Washington State, consolidation among the payers has resulted in only three or four major players, resulting in significant downward pressure on reimbursement rates. At the same time, our professional liability premiums are up over 50% from last year.

As a small group of fewer than 50 lives, very few payers even want to bid on our medical insurance coverage and for the last couple years, the only affordable solution has been to go through an employer association. At our plan renewal on May 1, our premium increased by only 4.8%, but we had to accept a 50% increase in our deductible, from $200 to $300, a 100% in the out-of-pocket maximum from $1500 to $3000 and a $20 co-pay on visits. The carrier wouldn't even bid on our previous coverage. So as folks in the industry, we are as perplexed as anyone about what is happening, because the premium increases certainly aren't ending up in physicians' pockets. Our sense is that with a rapidly growing national problem with professional liability insurance, the state of our health care delivery and financing system is precarious, at best.

My company is pretty small with only 30 employees. We've seen a 15-20% increase in premiums every year for the past 4 years. For our renewal coming up this summer, I've been told to expect a whopping 40% increase. Since the company picks up a large portion of the premiums, this is going to be a strain on cash flow. I'm also afraid we'll see employees drop their family coverage because of the increase in their contributions. To cope with the rising premiums, we'll probably switch to a plan design that includes higher user costs like higher co-pays and deductibles.

The short answer is we deal with healthcare premium increases through education and pain sharing.

Education: We educate employees on the cost of our plans and what drives the healthcare premium increases in general throughout the year and at the annual health insurance option review meeting (Increased prescription use and prices, aging population, malpractice lawsuits & insurance, etc.).

Pain sharing: We make changes in the plans every year even if they are minor changes to reduce premium increases (this year we increased office visit co-pays from $10 to $15). We pay 50% of dependent coverage premiums that means employees pay the other 50% that increases as premiums increase. We have also provided financial incentives to use less costly providers - that is the employee pays the difference for the more expensive plan if that is what they choose.

This strategy has been effective so far.

I am the controller for a continuum of care long-term health care facility and have seen the increase on both ends of the spectrum. Not only did our employee healthcare benefits increase 10%, but our liability, general professional, property and auto expense increased over 39%. One strategy we used last year to reduce our liability insurance cost was to bring facilities across the country, similar to ours with a good non-claim history, together to form an off-shore captive. It has greatly reduced our insurance expense and we are now part owner in a new line of business.