Price hikes in store as employers weigh benefit packages [The Bakersfield Californian]

Nov. 26—A single-digit increase at open enrollment never looked so good.

Workers around Kern County, unless they have an unusually generous employer, can generally look forward to significantly higher health insurance premiums next year — and a chance of still higher increases in the years ahead — because of inflation and pandemic staffing costs that haven't yet worked their way through the health-care system.

Individual rate increases vary widely because of factors like coworkers' health-care utilization patterns and what share of costs the employer covers. But estimates are that premiums could rise at twice or more the rate they went up last year as a first step toward catching up with industry cost increases.

Not that this should come as a surprise: There have been recent examples locally of segments of the health-care industry pushing back against the imposition of greater expenses, or cutbacks, associated with carrying on through a profound labor shortage.

In July, Kern Medical narrowly avoided a strike by an employee union fed up with staffing shortages. That same month, hospital chain Adventist Health went public with a contract dispute with Anthem Blue Cross of California over reimbursement rates.

Higher costs at issue in such disputes generally get passed on, if not entirely to employers then to their workers. At the end of the year is usually when workers find out how much it's going to cost them and what options they may have for cushioning the financial impacts.

During the next year, health-care benefit increases in California will average 5.6 percent, or more than three times as steep as they went up on the whole this year, according to an estimate shared by CEO Brian Freeman of Tennessee broker-rating company Mployer Advisor.

A separate projection by consulting firm McKinsey & Co. said employers could see their health-care costs rise next year by 9 percent to 10 percent, or more than twice the increase they experienced this year.

Inflation's a primary driver of these jumps, Freeman said, adding consumers won't feel the brunt of it yet because insurance companies don't renegotiate contracts with health-care providers every year. That, combined with expectations COVID-19 has become endemic, is a big reason why McKinsey sees costs going up through about 2026.

"There's a frustration, as you can imagine," Freeman said about employer responses to cost increases, which he added are mostly approved at the state level. "But the rates are somewhat what they are."

The next question is, who's going to make up the difference, employer or employee?

Companies typically cover about 75 percent of their workers' health benefit costs, but that varies, too. Companies working hardest to attract and retain top talent often have an incentive to shoulder a greater share of costs. Others offer what they can afford by balancing monthly premiums, deductibles and out-of-pocket costs.

Chief Operating Officer John McFarland at Bakersfield-based Horizon Human Resources said it's hard to predict how companies will rebalance their benefits packages this open enrollment season to keep rates palatable while potentially removing some offerings and shifting some expenses onto workers.

"It's always a balancing act," he said. "It's kind of like, 'We can't jack up the premium because no one can afford it."

Go too high on co-payments for doctor's office visits, McFarland said, and employees won't get the care they need. Another complication he pointed to is that younger workers may value health benefits less than they do student loan repayment programs and tuition reimbursement.

Kern County human resources practitioner Robin Paggi relayed a spectrum of responses when she asked her clients last week what they planned to do about employee benefits next year.

One company told her it experienced a 7 percent increase in premiums for its HMO and PPO plans, and that the employer's and its employees' costs went up that same amount.

Another employer Paggi works with stated this year was the first time it expected to share benefit cost increases with employees, and that the company planned to pick up most of the expense.

Yet another client that responded to her inquiry said it will pay the full cost of employees that choose an HMO option.

"If the employee chooses a PPO from our plan," the unidentified client wrote in a response to Paggi, "they will pay the difference no matter the increase."

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