Premium Hikes, Cost Sharing Putting The Squeeze On Benefit Buyers, Users

A stressed-out healthcare system has prompted costs of employer-sponsored group medical insurance to continue their sharp upward spiral, with employees being forced to pick up more of the tab, according to a survey by an insurance broker group.

“We're seeing sizeable increases in premium across the board, as well as substantial reductions in benefits in the sense of increasing deductibles, higher co-pays, and an incredible shift away from HMOs, back to PPOs,” said Ken A. Crerar, president of the Council of Insurance Agents & Brokers in Washington.

The CIAB's “Employee Benefits Fall Market Survey” found that 78 percent of small accounts–defined as those with 50 or fewer employees–had healthcare premium hikes of between 10- and 30 percent. An additional 14 percent reported premiums up between 30- and 50 percent.

For medium-size accounts (with 51-to-500 employees), 74 percent experienced rate hikes of between 10- and 30 percent for their employer-sponsored health plans, while 12 percent saw a rise in premiums by 30-to-50 percent.

Mr. Crerar said the market today has some of the same characteristics as back in the dark days, circa-1992, “when you saw huge increases in premium, and the public policy experts were all debating how to reduce the costs of the system. And I think thats when we saw healthcare reform as a big issue.”

Over the last 10 years, he said, there has been a shift in service from health maintenance organizations toward preferred provider organizations because “weve really squeezed most of the costs out of the system. Now were at a point where the actual increases are reflecting the costs that are still in the system–there is no more to squeeze.”

He explained that according to anecdotal information, HMOs tend to be a point or two more expensive than PPOs, “so now were moving back to PPOs because they tend to be network- and non-network based, where an HMO is a system, you walk into it.”

Future trends, Mr. Crerar said, include PPOs where employers are making the decision “that you either use the PPO network or they dont pay. So there is an incredible cost shift going on from the employer to the employee.”

Employee benefits buyers are being required to make “some tough decisions about how to keep costs down,” Mr. Crerar said. “Theyre shifting policies so there are much higher deductibles and higher copays. It is the only way they can contain some level of costs internally.”

At the same time they are trying to keep costs down, employee benefits buyers are also having to make sure their workers have adequate coverage, he said.

“The other thing we picked up from the survey is how the carriers are looking at group policies,” he added. “Were seeing much tighter underwriting. In the small-group marketthere was essentially no underwriting going on; it was just a gatekeeper survey. Now were seeing that theyre starting to underwrite at 50 employees and under, so its a much tighter market.”

The survey found that a small but growing number of employers also are considering a relatively new concept in health insurance–defined contribution or consumer-driven plans, which give employees a specific amount of money each year to pay for their own healthcare or coverage. However, some brokers say there is skepticism over this approach, according to CIAB.

More information about the survey can be found at the CIAB Web site (at www.ciab.com/resources/docs/fall02_eb_marketsurvey_all.doc).

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Premium Hikes, Cost Sharing Putting The Squeeze On Benefit Buyers, Users

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