The increasing cost of insuring health care remains the primary concern of employee benefits agents and their clients, but despite the attention the issue has received from both presidential candidates, producers are not hopeful for a solution from Washington in the near future.

Indeed, the next President will have other concerns that will likely preempt any plans either has for health insurance reform, according to benefits specialists.

Mike Brewer, president of the Lockton Benefit Group, cited the “crippling financial crisis” and continuing wars to fund as prime factors standing in the way of any comprehensive health insurance reform effort in Washington.

Meanwhile, it is too soon to tell what the ultimate effect of the recent financial meltdown and broader economic slowdown will be on employee benefit sales, according to Jonathan Black, a partner with Curtis & Black Insurance Associates in Danbury, Conn., who noted that some clients have gone out of business, while others have pared back the number of employees, which affects premium volume.

However, agents might be able to facilitate more efforts by businesses to join together to buy health coverage, such as the initiative announced earlier this month by the Professional Insurance Agents of New York, which will offer an association health plan for members and their employees. PIA said it developed the program due to requests from members.

The plan offers Exclusive Provider and Preferred Provider Organizations, as well as a national network, the association said.

Broader health care reform would be helpful, but brokers say the proposals advanced by the presidential candidates do not address the root causes of the rise in health care costs.

Part of the problem may be clearly identifying these main causes, said Mr. Black, who cited the amount of redundancy in the system as a major cost driver.

He said there are too many medical facilities in close proximity to each other–most fully-equipped with expensive equipment such as CAT scans and MRI facilities. Many times, he added, multiple hospitals are servicing small populations.

Gary Rygiel, partner and executive vice president of Englishtown, N.J.-based Liberty Insurance Associates, pointed to the high costs associated with indigent care, where the uninsured visit emergency rooms and hospitals do not get reimbursed for their services. Hospitals, he said, are getting overwhelmed by such “freebies.”

Mr. Brewer cited cost-shifting from Medicare to the private sector as a major driver of costs. He and Mr. Rygiel also mentioned “defensive medicine” resulting from the litigious nature of the country, in which doctors order unnecessary tests to cover themselves against any chance of a malpractice suit being filed.

The rise in costs have prevented any soft market cycle in employee benefits that traditional p-c agents may be used to in their end of the business. Indeed, while property and liability rates fall in double-digits for many exposures, Mr. Black said health insurance buyers experienced a double-digit hike this year, after seeing price increases ease somewhat to the single-digits in 2007.

These increasing premium costs have not significantly affected overall demand, according to Mr. Rygiel, who said employee benefits has remained profitable for his agency and others. “It is an income line for a good portion of agents out there,” he said.

Mr. Black said the steady demand reflects employers' recognition of how critical health care is for employees, which is why the cost-shifting phenomenon has not encouraged too many employers to eliminate benefits altogether.

Mr. Brewer, however, warned that the cost increases in health care delivery are not sustainable, while beneficiaries have absorbed all the legal cost-shifting they can from employer to employee through increasing co-pays and deductibles.

Despite this general recognition, solutions seem elusive, with product innovation not happening on a large scale for employee benefits.

Those interviewed for this article cited stalled consumer-directed benefit initiatives such as Health Savings Accounts, which encourage workers to put away funds to pay for future medical costs.

Mr. Brewer also noted waning enthusiasm for Consumer Directed Health Plans–in which employers give workers a set figure with which to pay their own health insurance premiums or medical costs, rather than buy a group plan for all employees.

As an alternative to dealing with claims after the fact, benefits brokers have been more proactive in helping clients manage the front end of medical costs by preventing illnesses and injuries in the first place.

Mr. Brewer said Kansas City, Mo.-based Lockton and other brokerage firms have been concentrating on helping employers establish and manage wellness programs.

Lockton's initiative, for example, encourages employees to do health risk assessments, employing biometric data to identify workers who may be at risk for heart disease or diabetes.

The goal, he said, is to identify warning signs–such as obesity and high blood pressure–before there are expensive claims, and then work with employees to correct the problem.

Mr. Brewer said an at-risk employee may not even know they have high blood pressure, which can be controlled with diet and medication. Through Locton's wellness program, a counselor coaches employees on how to address their risk factors. While the process is fairly expensive, he said, the long-term savings opportunities are significant.

Mr. Brewer commended the media for talking about obesity, diabetes, high cholesterol and other health risks–attention that has given employers credibility in addressing the issue.

Special Reports /

Benefits Agents Don't Expect Health Reform From Washington

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