Insurance premiums outrun reform

Employer-sponsored plans could see double-digit increases

Even before health-care reform takes effect, health insurance companies are taking action -- and reaching into consumers' wallets.

Driven by worries about the economy and possibly the effects of health-care reform, they are raising rates this year for family coverage through employer-sponsored plans.

And not just a little. Local brokers and insurance company representatives say this year's increases range from 8 percent to 21 percent, which is considerably higher than the 5 percent increase the Kaiser Family Foundation reported in 2009.

Some employers with sticker shock are passing on higher costs to their employees. Others are opting for lower-cost plans with higher deductibles.

"There's a lot of concern and frustration in the marketplace," said Stephen Gregory of Carmel-based Shepherd Insurance & Financial Services.

Gregory and Kim McCarson, a broker with Indianapolis-based Benefit Strategies, said it's too early to know exactly how the recently signed health-care legislation may affect employer-sponsored health insurance. Experts have said they do not expect reform to dramatically change that market, at least immediately.

The reforms, however, will bring tighter regulation to health insurers, an industry already under pressure from the economic downturn.

For-profit health insurers such as Indianapolis-based WellPoint have seen revenue fall as companies cut jobs and reduce the number of workers in their benefit plans.

Meanwhile, health-care costs continue to rise, although WellPoint recently noted that this year's increase is looking to be less severe than in 2009.

Insurers appear to be responding by protecting their profits.

"It's definitely true that insurers are trying to raise their prices at more than their projections of what's going to happen to their costs," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit research group based in Washington, D.C.

Ginsburg said such pricing for profits is part of the normal underwriting cycle -- just as a department store may charge full price to maximize gains at times, and discount items to gain customers at other times.

Even before health-care reform takes effect, health insurance companies are taking action -- and reaching into consumers' wallets.

Driven by worries about the economy and possibly the effects of health-care reform, they are raising rates this year for family coverage through employer-sponsored plans.

And not just a little. Local brokers and insurance company representatives say this year's increases range from 8 percent to 21 percent, which is considerably higher than the 5 percent increase the Kaiser Family Foundation reported in 2009.

Some employers with sticker shock are passing on higher costs to their employees. Others are opting for lower-cost plans with higher deductibles.

"There's a lot of concern and frustration in the marketplace," said Stephen Gregory of Carmel-based Shepherd Insurance & Financial Services.

Gregory and Kim McCarson, a broker with Indianapolis-based Benefit Strategies, said it's too early to know exactly how the recently signed health-care legislation may affect employer-sponsored health insurance. Experts have said they do not expect reform to dramatically change that market, at least immediately.

The reforms, however, will bring tighter regulation to health insurers, an industry already under pressure from the economic downturn.

For-profit health insurers such as Indianapolis-based WellPoint have seen revenue fall as companies cut jobs and reduce the number of workers in their benefit plans.

Meanwhile, health-care costs continue to rise, although WellPoint recently noted that this year's increase is looking to be less severe than in 2009.

Insurers appear to be responding by protecting their profits.

"It's definitely true that insurers are trying to raise their prices at more than their projections of what's going to happen to their costs," said Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit research group based in Washington, D.C.

Ginsburg said such pricing for profits is part of the normal underwriting cycle -- just as a department store may charge full price to maximize gains at times, and discount items to gain customers at other times.

He said part of the year's pricing is from insurers likely anticipating a changing marketplace. WellPoint, the nation's largest health insurer, declined to comment on its pricing strategy.

In a conference call this month with Wall Street analysts, WellPoint Chief Financial Officer Wayne DeVeydt said that WellPoint expected its medical costs for 2010 to rise by about 8 percent, down from 8.9 percent in 2009.

DeVeydt also said WellPoint's 2010 profit estimate of $6 a share was "subject to our ability to secure and maintain sufficient premium rates" and did not factor in any impact from health-care reform.

When asked about factors driving premium increases, WellPoint cites the continued rise in health-care costs and increased demand for medical services, including costly prescription drugs and advanced technologies.

Tony Felts, a spokesman for WellPoint's Anthem Blue Cross and Blue Shield of Indiana, said the average increase in premiums for group coverage is comparable to what has occurred the past few years. He did not provide any details but did say that increases in the group market are averaging less than in the individual market, where they averaged 21 percent.

Gregory, the Indianapolis insurance broker, said premium increases for spring renewals for employer-sponsored plans are running from roughly 15 percent to 20 percent.

He said small employer groups, those with roughly two to 50 employees and dependents enrolled in benefit plans, tend to be seeing larger increases than a year ago.

McCarson the other area broker, said his clients are seeing premium increases in the 8 percent to 13 percent range this year.

The premium increases continue a decade-plus trend. The nation's average annual premium for family coverage through employer-sponsored plans reached $13,375 in 2009, an increase of 131 percent since 1999, according to the Kaiser Family Foundation.

Premiums at public broadcaster WFYI Indianapolis will jump by 23.4 percent next month.

"We did have an unhealthy year as a corporation," said Jeanelle Adamak, executive vice president. She said WFYI has seen small increases in premiums -- or even decreases -- in recent years.

Adamak said Anthem initially was going to charge the public broadcaster a 29 percent increase for the year of benefits to begin April 1. But she said Anthem worked with WFYI to bring that down.

"We were pleased they came down," Adamak said. She said WFYI, which pays the bulk of the premium for the 66 people covered by its health plans, has tried to keep insurance costs down and provide perks such as a workout room and yoga classes.

However, that means workers face higher out-of-pocket costs for medical care.

A single person covered by the broadcaster's health-savings account plan pays about $398 a month in premiums, with an annual out-of-pocket maximum of $2,650. Last year, that out-of-pocket cap was $2,000.

Gregory said employers continue to shift more health-care costs to workers as a way to lessen the blow of the annual premium increase.

But he said as the economy has stumbled and health costs continue to climb, employers don't seem to be getting as many complaints from their workers from the higher deductibles, premiums, co-insurance and co-pays.

Instead, Gregory said, the sentiment seems to be "I'm lucky to have a job."