Rising Insurance Costs Crimp Companies' Plans

Aug. 26--Western New York's three big health insurers are again seeking to jack up rates by significant amounts in some cases -- and some employers are taking desperate measures as a result.

BlueCross BlueShield of Western New York is asking for double-digit hikes for most plans, while Independent Health Association and Univera Healthcare are seeking increases of mostly less than 10 percent.

The price hikes, detailed in the carriers' filings with the state Department of Financial Services, mark another year in which premiums are rising much faster than the rate of inflation or household income.

That adds to the burden on households and businesses already straining from past increases. And it shows that, at least so far, the efforts by insurers, employers and medical providers to control the spiraling costs are having limited effect.

"The train wreck continues. It's unfortunate, but it seems that whatever products the carriers develop, whatever wellness programs they put together, it just doesn't seem like they can get a lot of answers that people are looking for," said Gregory D. Leifer, director of life and employee benefits at brokerage firm Scott Danahy Naylon.

"It's pretty much the same old story from year to year," said Howard N. Silverstein, CEO of Choice Employee Benefits Group LLC in Williamsville. "The community-based products just are obviously a burden to many of the employers."

That's forcing many to make tough decisions, such as dropping or reducing coverage, or shifting entirely to newer plans with high deductibles and cost-sharing that puts much more of the burden on employees. Traditional HMOs or similar plans, with low co-pays, are becoming dinosaurs.

Some companies are slowing or delaying hiring to control health care costs.

"If they're really looking to reduce their expenses, they're going into these plans where there's unfortunately more of an out-of-pocket cost to the employee or consumer," said Nick Siradas, account manager for small groups at Lawley Insurance.

The new rates are not final yet. Under state law, the insurers' rate requests are still subject to review by the state, which can approve them, reduce them or reject them. Last year, the state trimmed many rate hike requests across the state, though not so much for Western New York's three carriers.

Consumers and business owners are writing to regulators to protest what they see as unreasonable hikes, and demand the state block them:

"I know of no one that is receiving these kinds of rate increases in their pay," wrote one consumer. "I strongly encourage [you] to not consider any rate increase at this time."

"This is ridiculous and is creating such a hardship not only on me but my employees and my payroll," another wrote. "New York State cannot allow this ... This is unconscionable."

Meanwhile, carriers, businesses and consumers await the promised benefits of the Obama administration's Affordable Care Act. While some provisions have taken effect -- such as expanded benefits for dependents until age 26 -- they are more likely to drive up health care costs, not lower them, because they expand coverage.

The health insurance exchanges are supposed to help with expenses by bringing an estimated 32 million uninsured Americans into the system, so costs can be spread over a larger base with more competition.

But those provisions don't kick in until 2014, and the details remain vague. So businesses are guessing about the impact, and many are skeptical the exchanges will yield desired results.

"They're really not optimistic," Silverstein said. "They're in fear of these exchanges."

"A lot of my clients are taking a wait-and-see attitude," Siradas said. "Until the exchanges are in place, we won't know what they're going to do."

Ron Alsheimer learned the rates for his company's BlueCross BlueShield plans could go up 12 percent, after a similar hike this year. The premium for family coverage for Traditional Blue is now $3,700 a month.

Already, that's crimped any plans for growing his company, Buffalo-based commercial real estate developer Plaza Group, which has 11 employees. Between health and workers compensation insurance, the costs of adding staff are prohibitive. "I wouldn't consider hiring anybody else now, anybody who would need health insurance. It just isn't worth it," he said.

He turned to Buffalo-based HR Benefit Advisors to find a less expensive provider for the half-dozen employees that get coverage. "I've had enough. It's just lunacy," he said. "I want him to look into something that's going to put a cap on this nonsense."

Health insurance premiums have been skyrocketing every year for more than 15 years, prompting outrage among businesses, consumers and politicians nationwide. Critics blame greed by providers and insurers.

But insurers say the costs are driven by increased use of more expensive specialty drugs, surgeries, emergency services, lab tests and sophisticated technology, which enable people to live longer but don't come cheaply. Lifestyle and habits are also factors, as the Western New York population is aging and tends to be overweight and not healthy, with high rates of cancer, heart disease and diabetes. About 75 percent of medical costs stem from chronic conditions that experts say can be managed.

"We don't need to be reminded about how unhealthy we are as a community or country," said Christopher C. Kempton, director of group benefits for insurance agency Walsh Duffield. "If we as a society are serious about controlling health care costs, then we have to change our individual behaviors in addition to how we deliver care."

Insurers and employers have responded by increasing co-pays, deductibles and coinsurance, or trimming benefits. They've changed plan designs and introduced wellness programs, biometric screenings and incentives to be healthy.

"The rates are showing more consistency, with medical increases hovering around a projected trend," said Rocco Lueck, managing director of HR Benefit Advisors. "Health care spending has slowed."

Testing employees

Dunn Tire faced a 17 percent increase when it renewed its health plan from Univera Healthcare in March, the latest in a string of large rate hikes. So the company instituted a wellness program and offered a discounted premium to employees who participated in a biometric exam to measure their height, weight, cholesterol, and blood pressure.

The purpose was to evaluate their health and determine who would benefit from an eight-week class focused on nutrition and exercise. Those selected to take part in the class had to complete it to get the discounted rate. Final results are not in and the company probably spent an extra $30,000 on the program, but Human Resources Director Bill Cleary thinks it will be worth it in the long run.

"It's such a significant portion of the benefit package, and as they continue to rise, the concern is that people aren't going to be able to afford health insurance," he said. "We're hopeful that this program will cut or curtail those increases, and we won't see the double-digit increases that we have."

But more and more companies, like M&T Bank Corp., also are turning to consumer-driven health plans with high deductibles and health savings accounts as a way to put more responsibility on the consumer, who has to meet a minimum threshold of out-of-pocket spending before the insurance and co-pays kick in.

Such plans were slow to pick up in popularity in Western New York, but the continuing pressure is driving more companies to add them. Some companies are dropping their traditional plans entirely in favor of high-deductible plans. And some are going a step further, and changing the co-pays to coinsurance where employees pay a portion of every medical cost they have.

"We're definitely seeing a shift away from HMO plans," Siradas said.

Still, rates keep going up, even for high-deductible plans that are supposed to be cheaper. "Everybody's trying everything. But we're not getting rate relief," Leifer said. "A lot of people feel that no matter what they do, they just can't beat it."

Increases vary

Under the state's "prior approval" law, the region's carriers submitted plans to state regulators for next year, specifying their desired rate increases for 2013, or even breaking it down by quarters, and justifying their need for higher premiums. The rates are for "community-rated" plans for individuals and small groups, and don't include Medicare Advantage or groups whose rates are based on their own company experience.

HealthNow New York, the parent of BlueCross BlueShield of Western New York, wants to raise large group rates by an average of 6 percent to 23 percent and small group rates by an average of 7.4 percent to 23.3 percent. Out of 13 plan types at the Buffalo-based insurer, all but three of the large group increases and one for the small group plans are well over 10 percent. Only one is a price cut. The rate requests affect less than 19 percent of its members because the majority are in "experience rated" plans not subject to state review.

"BlueCross BlueShield is sensitive to the rising cost of health care, and goes through a rigorous review process that takes medical trend, utilization, technology and claims data into account," said spokeswoman Julie Snyder.

For Williamsville-based Independent Health, all but one of the price increases are under 10 percent, including one price cut. Aside from the one 15 percent hike for Healthy New York, rate increases vary from 3 percent to 9.8 percent. Large group HMO rates will rise 4.9 percent, while small groups will go up 3.7 percent to 8.2 percent.

"Independent Health's proposed premium rate adjustments for 2013 are among the lowest in several years," said Senior Vice President and Chief Marketing Officer Nora McGuire.

And for Univera, the subsidiary of Excellus Health Plans of Rochester, rate hikes range from flat to 18.9 percent. The individual direct-pay HMO and point of service plans will even fall by 3.4 percent.

"We continue to see an increased use of health care services and higher payments for many of those medical goods and services that together are driving the increased cost," said President Arthur Wingerter. "We aren't immune to national trends."

In the end, employers and consumers are largely stuck with it. "I hate to say it's almost automatic and expected ... but at the end of the day, they just throw their hands up," Leifer said.

jepstein@buffnews.com

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