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Employers, individuals face tough choices on health coverage

October 17, 2009|By ARNOLD PLATOU

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HAGERSTOWN -- Two years ago, CareFirst BlueCross BlueShield told Peter P. Thomas his agency would have to pay 16.4 percent more to keep its workers' health insurance the same.

To make that more affordable, the Western Maryland Consortium, of which Thomas is executive director, agreed its staff would pay higher deductibles -- and still, the premium was 6.9 percent higher than the previous year.

This past year, CareFirst wanted the consortium to pay 22 percent more and, for the new insurance year it began this month, 19.5 percent.

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"This is tough," said Thomas, whose work-force development agency has 18 employees in Western Maryland. "It's a very expensive proposition anymore."

"Our employees pay for a portion of it, but each year, we have to make decisions how we're going to offset these huge rate increases," Thomas said. "We're being forced into plans we don't really want to be in, but that's all there is. It's a tough, tough issue."

Increasingly, companies that offer health insurance to their workers are being hit with such choices, insurance experts say.

"It seems like we've been fixed for years on double-digit increases," said John Schnebly, chief executive officer of Keller Stonebraker Insurance, a Hagerstown-based brokerage that sells others' insurance products to companies and individuals throughout the area.

"And my thinking is, how long can we sustain this? We are seeing some companies abandon their health insurance plans because the cost has become so prohibitive," Schnebly said.

Nationwide, the average premiums for employer-sponsored health insurance increased this year to $13,375 annually for family coverage, according to the 2009 Employer Health Benefits Survey. On average, workers are paying about one-fourth and employers the rest.

The 5 percent increase comes in a year when inflation fell 0.7 percent, said the independent, nonprofit Kaiser Family Foundation and the Health Research & Educational Trust (HRET), which did the survey.

"Since 1999, premiums have gone up a total of 131 percent, far more rapidly than workers' wages (up 38 percent since 1999) or inflation (up 28 percent since 1999)," the two organizations said in a news release.

"When health care costs continue to rise much faster than overall inflation in a bad recession, workers and employers really feel the pain. That's why we're having a health reform debate," said Drew Altman, president and CEO of Kaiser.

Employers growing frustrated

In the 18 years he's worked for Keller Stonebraker, insurance broker Mike Cumberland has helped many companies design their employee benefits plans.

And, he said, he's seen their frustration mount.

"For a number of years, a lot of employers have been growing increasingly frustrated at the state of the market when it comes to health insurance. We've seen a significant increase in premiums," Cumberland said.

Even Keller Stonebraker is not immune.

This year, the insurer from which Keller Stonebraker obtains health coverage for its own work force wanted a 33 percent higher premium, Schnebly said.

"But then, after we made some plan design changes and we hired a 25-year-old, it changed some of the census information. So we ended up with about (a) 23 percent" increase, Schnebly said.

To that extent, hiring that younger employee helped, he said.

"Sometimes, it depends on, frankly, what the ages of the group are," he said.

A year ago, Keller Stonebraker settled for a 13.5 percent increase. And in 2007-08, he said "this is kind of amazing, we were only at (a) 3 percent" increase.

Throughout the area, however, double-digit increases seem to be spreading.

"A lot of employers are faced with rate increases of 20 (percent) or 25 percent," Cumberland said. "You compound that over a period of years, say, three years, a lot of employers have seen their health care costs double."

Lest anyone wonder, Schnebly said, insurance brokerages such as his aren't "getting rich off these increases. You know, the client's rate might go up 25 percent, but, typically, we might see a 3 1/2 percent increase per head in a given year on an account like that.

"So, our compensation doesn't float with the increase in the premium," he said.

To deal with the rising premiums, many employers are passing a greater share of the cost to their workers, Cumberland said. Deductibles and co-pays are rising, and more are setting up health savings accounts so employees can pay the deductibles from their own earnings, set up in the pretax accounts.

Reducing benefits

Across the nation, many companies are reducing benefits, according to the Kaiser-HRET survey.

"Among those offering benefits, 21 percent report they reduced the scope of health benefits or increased cost-sharing due to the economic downturn, and 15 percent report they increased the worker's share of the premium," the survey found.

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