As benefits shrink, premiums are growing on many health insurance plans
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JANESVILLE — It's that time of the year again: open enrollment for health insurance.
Employees are called to mandatory meetings to learn about changes in their employer-sponsored benefits for the coming year.
They often leave with the belief that open enrollment means open season on their pocketbooks.
Employers are in the same boat, and runaway health costs are fueling efforts to overhaul the nation's health system.
In 2009, the average annual premium for employer-sponsored family coverage outpaced inflation, rising 5 percent for the third straight year and topping $13,000 for the first time, according to statistics from the Kaiser Family Foundation.
Businesses are doing all they can to lower expenses for 2010, and the results being unveiled in open enrollment sessions are higher premiums and higher deductibles.
They also could include a type of plan that can cut premiums by nearly 20 percent and give consumers a tax break.
But with the plans, called consumer-directed health plans, there's a tradeoff: higher deductibles, which have the potential to swamp customers with big medical bills.
'You have to be careful'
Consumer-directed health plans have been around for years, but more employers now are considering them. Such a plan typically pairs insurance that carries a high annual deductible with a health savings account fed either by the employer or by the employee through pre-tax contributions.
Deductibles start around $1,200 a year, and deductibles can approach $10,000 for family coverage. The plans make the customer pay more out-of-pocket before most coverage starts. The idea is to give clients an economic incentive to spend carefully, while providing protection from devastating medical bills.
Industry analysts say consumer-directed health plans can benefit people on both ends of the health care spending spectrum, but they can be risky for people with tight budgets and little savings.
"Those are plans that you have to be really careful with," said Bill Boyd, a partner and chief financial officer of Boyd Consulting Group in Janesville. "It really depends on the group of employees you're taking it to."
Premium increases
Since its inception in 1995, Boyd Consulting Group has grown from a two-person operation to a company that designs and implements employee benefit plans for more than 100 companies in six states.
Plenty of those are in the Janesville area, and Boyd is seeing health insurance plans that include premium increases averaging 8 percent to 9 percent.
"It really depends on the (insurance) company you're working with," he said. "We're seeing some of the Mercy and Dean plans come in with increases in the single digits."
Others, such as United Healthcare and WPS, have been carrying 12 percent to 14 percent premium increases, he said.
Boyd recently worked with three companies who experienced MercyCare premium hikes of 0 percent to 2.5 percent.
"A lot of that is because of steerage," Boyd said. "The Mercy and Dean plans can steer employees into their system, and they can therefore offer deeper discounts."
Boyd said employers are asking what they can do with deductibles to lower premiums.
Several are looking at new or higher deductibles on drug plans.
They're also considering value-added options and benefits that give employees more services and allow the employers to realize package discounts from the insurance companies, he said.
Carving out spouses
Dan Robinson, a vice president of Hays Companies, said he's seeing another trend: a move to "spousal carve-out" plans where an employer that self-funds its plan will cover an employee but not his or her spouse if the spouse can get coverage at his or her workplace.
"It's not unusual at all for an employer to spend more on a per capita basis on a spouse than the employee," said Robinson, whose insurance brokerage company works with 145 businesses in Wisconsin, including several in southern Wisconsin.
Robinson said the plans allow employers to cut costs, but they're not particularly appealing to employees.
Such a plan likely drives up insurance costs for the employee and spouse, who must decided where to insure dependents. The employee than is left to pay for himself and dependents while the spouse pays for single coverage.
That—or separate single coverage plans—usually cost more than the original family coverage, he said.
"There is a pushback, and people don't like it, but about 25 percent of the companies I work with are going to this type of plan," he said.
Robinson said his underwriters are projecting an 11 percent increase in health care costs for 2010. Increases in premiums are averaging about 6 percent to 7 percent.
Material from the Associated Press was used in this story.
OPEN ENROLLMENT TERMS
Open enrollment season for employer-sponsored health benefits can come loaded with confusing terms. Here is a glossary of common words or phrases:
Coinsurance: This is the percentage a patient pays for a medical service generally after a plan deductible is met, and it can vary by plan. Your insurer may pay 80 percent of the cost of your X-ray, and you pay the remaining 20 percent.
Consumer-directed health plans: These plans typically pair high-deductible insurance with a health savings account or an employer-funded health reimbursement arrangement to help manage out-of-pocket costs.
These plans often give the customer a lower premium, but they must pay a high deductible before coverage starts. For plans with health savings accounts, that deductible must be at least $1,200 for individuals and $2,400 for family coverage next year.
The idea behind them is to give customers an incentive to shop judiciously for health care.
Co-payment: or co-pay, the flat dollar amount a patient has to contribute toward the cost of a covered medical service. An example would be the $20 charge at the doctor's office. These amounts are spelled out in insurance plans and don't vary based on charges the way coinsurance does.
Deductible: the annual amount a patient pays out of pocket for care before insurance coverage starts. This varies widely by plan. Insurance with high deductibles, which generally means $1,200 or more, often comes with lower premiums.
Flexible spending account (FSA): This lets employees set aside pre-tax wages for certain medical expenses not covered by insurance. The money must be used in the year it is set aside or it is forfeited.
Health reimbursement arrangement (HRA): This is an employer contribution to certain medical expenses before deductible and coinsurance amounts are applied. These help the employee pay the higher out-of-pocket costs that come with a consumer-directed health plan.
The money in an HRA belongs to the employer. That means the employer keeps it when an employee leaves a plan or the company.
Health savings account (HSA): Like the HRA, these also help people in consumer-directed health plans pay out-of-pocket medical expenses. Unlike HRAs, employees or customers own the HSA. They can deposit pre-tax money in the account, and some employers also contribute to them.
Any unused balance grows, and the customer keeps the account when leaving a job.
Next year, customers will be able to set aside as much as $3,050 in an HSA for individual coverage and $6,150 for family plans. Account holders over age 55 can also make increased payments until they reach Medicare eligibility (usually at age 65).
High-deductible health plan: These can come with lower premiums than traditional coverage, but the patient pays more out of pocket before coverage starts. High deductibles generally top $1,200. If they are at least $1,200 for an individual or $2,400 for a family, the plan can be paired with a health savings account.
Consumer-directed health plans involve high-deductible insurance.
Out-of-pocket expense: the amount an employee or customer must pay toward the cost of care. This includes deductibles, co-payments or coinsurance.
Premium: This is the monthly bill to carry an insurance policy. Employers pick up 84 percent of the premium for single coverage, on average, and 74 percent for family plans.
Nov 11, 2009 at 5:19 a.m.
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RAF--I can't agree with your version of 'reality' regarding what/how well 'government' does something. But, for the sake of this discussion, let's assume that Medicare is an example of how poorly govt. runs health care. Compared to how the current system financially rapes those that have insurance, I'll put up with whatever pitfalls come with 'government run healthcare.' The fact that politicians are working so hard to protect the ability of the current system to continue to profit off of the sick is in itself, sick. The fact that a vocal minority seem to support that concept is even worse. I'd take my chances with a 'Medicare-for-all' system any day of whatever week of the year you choose...
Nov 10, 2009 at 9:07 p.m.
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We DO need reform now. But we also need our government to put caps on medical cost and insurances.
Nov 10, 2009 at 11:42 a.m.
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Zoom; Your right, the medicare is only going up 15% for everyone under $85,000 single or $170,000 married. Based on the 08 tax return. Our new monthly fee is $110.50 THEN, they will gut it $400 billion over 10 years IF this Health care crap passes the Senate and prez signs the bill. When I factor medicare and supplemental together the increase drops to 53% for 2010. We may keep it one more year depending on 2011 increases.
Nov 10, 2009 at 12:07 a.m.
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“That government does not work is a myth spawned by anti-tax politics and has no serious relationship to reality.”
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The flaw in your argument is assuming because something that government does, like delivering a check on time, thus concludes that government works.
Most arguments are not in if the government can’t do something, it is IF they should be doing it (in the first place), and when done is accompanied by wasteful practices and spending. Processing an EFT on time is done millions of times a day all over the world, and not indicative of an effective government.
Government is fairly good at revenue gathering and spending; not so efficient at either. Proficient at drafting, debating, and voting on new laws; exempting, at times, lawmakers. The list can go on and on. The unfortunate reality is more of what government does people are not happy with, unsatisfied customer, than the opposite.
Nov 9, 2009 at 11:11 p.m.
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It's not that the government doesn't work, it's that the government is inefficient. A lot of money is wasted by government. To think that the federal government can run health care more efficiently than the private market is to have faith that they can do something they've shown no ability to do in other areas. I'm not saying it couldn't happen, just that it's unlikely.
Nov 9, 2009 at 8:10 p.m.
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Janesvillean......The USPS lost $2,800,000,000 last year. Social Security is projected to start running into shortfalls as early as 2017. Obama's own numbers but Medicare fraud and waste at over $500 billion......As far as I know the government doesn't build roads, rather hires engineering and contracting companies to do that.....The government has very little accountability when it comes to it's finances because they have an unlimited source of revenue to make up for the shortfalls. If Fed Ex had posted losses relative to the $2.8 billion that USPS lost, heads would have rolled....that definitely didn't happen at the USPS.....
Nov 9, 2009 at 4 p.m.
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You know, I'm tired of this myth that government programs are some sort of shambolic mess. I mailed a first-class letter the other day for less than the cost of a Gazette and it arrived before noon the next morning in another city. My parents, and millions of Americans, receive their Social Security payments via direct deposit on time every single month. I have driven on Interstate highways constructed to some of the most exacting standards in the world. Every week this year the FDIC has closed a bank and reopened it under new ownership with hardly a ripple of disturbance to depositors, overnight. Overnight. That government does not work is a myth spawned by anti-tax politics and has no serious relationship to reality.
Nov 9, 2009 at 2:12 p.m.
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gpawcat said: "Medicare part B is a option that is deducted from the Social Security is raising to $106 January."
-Not according to the Health and Human Servies office. It will only go up for people with incomes of more than $85,000 (or more than $170,000 for joint filers). If you're in that catagory, good for you! Even if it did go up to $106, dropping part B just doesn't make sense. Your $2,000 HSA account won't last long compared to all the benefits provided under Part B for that $96.40(or $106)/month.
gpawcat said: "...then if health care passes the medicare cuts the Doctors fees."
-How would that effect how much you have to pay for services? (That's a serious question). We won't really know the true changes to Medicare until the Senate passes a bill (end of the year, at best), and the House and Senate bills are combined. Nothing is going to happen to Medicare next year. I'm wondering who is giving you this bad information.
Again, have you shopped around for supplemental insurance? It could be that Humana simply sucks. I've heard of others with Humana having their rates increased.
Nov 9, 2009 at 1:41 p.m.
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Yes, there are a lot of components making up the huge cost increases. This is not a new thing though, this article could have been written 5 to 10 years ago and it would have read almost the same. Premiums have been rising by double digits for a long time and companies have been trying to minimize the increase by shifting costs to the employees for almost as long. Higher Office Visit and Drug copays. Opting for a co-insurance plan. Moving to a high deductible plan. Paying less of the premium themselves (it's not uncommon to see the employee share of the premium be as high as 50% at some companies). These are all methods the employer uses to keep their budget balanced when huge increases hit. I don't blame them in most situations. Its a no win situation for them. I expect we'll see the same article written 5 years from now. As a country I don't think we have the stomache to make the changes necessary to stop this process.
Nov 9, 2009 at 12:58 p.m.
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Hey 916WI - and then some day when private health care is no longer profitable we taxpayers can bail them all out! Don't you understand, no matter who is in charge, you and I are going to pay for it. Honestly, given the current status of our economy I cannot believe there are still people out there who will try to make the claim that "businesses" do things better than the government. I'm certainly not claiming the gov. does it better, it's just that it would be hard to do any worse.
Nov 9, 2009 at 12:47 p.m.
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There is plenty of blame to go around as to why health care costs are so high.
1) Insurance companies (high CEO pay, complex rules that require an entire staff at the doctor's office just to figure out and comply with, advertising and other non-health related expenses, etc.)
2) Hospitals (high CEO pay, trying to compete by having the newest, most expensive technology, constant remodeling/updating to look good)
3) Patients (not taking care of their own health, not utilizing health care in the most effective ways--like overusing the ER or going to the doctor for every little virus or ache, frivolous lawsuits).
4) Doctors (defensive medicine--testing too much to protect themselves from lawsuits, ordering unnecessary care for monetary benefits, not recommending generics, or not knowing the cost differences between different options, being too cocky to admit when they don't know what they are doing)
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These are just a few examples for each player in the healthcare game. It is indeed a very complex issue and change needs to happen at all levels.
Nov 9, 2009 at 12:37 p.m.
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I totally agree, it is NOT just one area, that's why I laugh at all the comments that it is all because of the insurance companies. So yes, I understand all the other things that go into those costs, which is why some sort of reform is needed.
The OV was for a first time patient with a PA, not even a Dr, $223 dollars. All to write the order to have a blood sugar test done. It is getting outrageous.
Nov 9, 2009 at 11:51 a.m.
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ilovehockey-
You do realize the reason the health care provider charges so much for a visit (and I'm not sure I buy the $200 15 minute visit, but I won't dismiss it out of hand, since I haven't researched it). The providers have to over charge the insurance companies to make up for the fact that medicare and medicaid don't reimburse them for the full cost of the care they provide. They also have to cover a lot of overhead too (technology, malpractice insurance, keeping up with government mandates, etc.). Health care also has a serious shortage of primary care doctors which will increase costs of primary care visits and increase wait times. It's not as simple as pointing to one group and saying "there's the problem with health care in this country". It's a very complex industry. The blame for the huge rise in costs can be spread to many and at least some part of it is the fault of the consumers who have unhealthly lifestyles and don't want to pay the costs associated with that lifestyle.
Nov 9, 2009 at 11:05 a.m.
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I always love the educated comments that always blame the insurance company's for their rates. People, it starts at the doctor's office. When the charge is over $200 for a 15 min office visit, there is a problem. So, as the medical community raises their rates and builds new parking ramps, who do you think pays for it! Now, as a business, does the insurance company eat those extra costs, or do they pass them on?
Nov 9, 2009 at 9:59 a.m.
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The Humana advantage started out a sweet deal, but I guess it's like a introductory credit card. Medicare part B is a option that is deducted from the Social Security is raising to $106 January. then if health care passes the medicare cuts the Doctors fees. If I take the $2000. in premiums per year, stick it in a Health savings account the doc will get full pay. Still have Medicare part A, the hospital at no extra charge. If we stay healthy a few more years, we'll have enought for a nice funeral. If sickness hits this year, I'm toast.
Nov 9, 2009 at 9:31 a.m.
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haha - the kid strikes again! I can't say that I don't disagree, but...
Janesvillemom, well said - I currently am enrolled in my company's PPO with the lowest possible copay/deductible, and the copay just went up, the premium increased about 20% and can't envision this not continuing indefinitely. Reform has to happen NOW!!
"The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; those who are in the shadows of life; the sick, the needy and the handicapped." - Hubert Humphrey
I'm not going to pretend that I know all of the answers, but it saddens me that we are incapable of helping those in need - the percentage of individuals who are in need increases daily - NOBODY should ever have to make life or death decisions on health care costs.
Nov 9, 2009 at 8:18 a.m.
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legalize and tax marijuana. we'll pay for health care for all!!
Nov 9, 2009 at 7:48 a.m.
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Janesvillemom:I agree with you 100%.We have to get reform.The Ins. co. will keep raising there rates till we get control...GPAWCAT.Humana is useless there rates have allways been way up...........
Nov 8, 2009 at 11:43 p.m.
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As far as the Humana supplemental insurance goes, have you shopped around?
Nov 8, 2009 at 11:39 p.m.
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gpawcat, grandma still has Medicare Part A, right? How are you "dropping out" of Medicare?
Also,
Most Medicare beneficiaries will continue to pay the same $96.40 Part B premium amount in 2010. Beneficiaries who currently have the Social Security Administration (SSA) withhold their Part B premium and have incomes of $85,000 or less (or $170,000 or less for joint filers) will not have an increase in their Part B premium for 2010.
http://questions.medicare.gov/cgi-bin/me...
Nov 8, 2009 at 10:59 p.m.
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Whoopie! After paying medicare out of our pay checks all these years, and deducting from her Social Security check each month, grandma got to enjoy government health care for 6 months. We might as well flushed the money down the toilet so it could come back in our water supply. It would taste better than what we got.
Nov 8, 2009 at 10:43 p.m.
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Thanks to our government induced hysteria, grandma's humana supplemental insurance will increased 250% January 2010. We will drop the supplemental, and since the gov is cutting 400 billion from medicare, we will drop medicare part b. We will have to put $1000.00 in a medical savings account and $166 per month. The Democrats are using the Cloward-Piven strategy. Rather than playing into their hand, we will drop out.
Nov 8, 2009 at 9:55 p.m.
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Seriously Zoom.....You can't be that naive. Using that number to justify recreating 1/6 of our economy. The deficit for last year alone was 13 times that amount. Regardless, as always, the CBO's numbers are posted with that wonderful caveat: “The estimates are all subject to SUBSTANTIAL uncertainty."
We all know that government programs always come in under budget......right???:)
The one thing that is certain is that if this program is put into place it will cost well over a trillion dollars.
It's actually comical in a way--Obama wants to partially fund the reform of a broken private health care system by recapturing of waste and massive fraud in excess of $500 billion from a broken public health care system(Medicaid)--but not by actually fixing the broken public system first, rather saying that they will promise to fix it and then divert the money at a later date after it's fixed.......Good luck with that Prez! I'm sure it will work out for you:)
Nov 8, 2009 at 9:44 p.m.
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Zoom, some people don't understand health care reform, they are just against it because Beck or Rush or somebody TOLD them to be against it.
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Reality is, if we do nothing, we will all be going broke just trying to buy insurance, let alone trying to pay the medical bills that our insurance won't cover! Our premiums on private insurance went up 700% in 7 years! In those same 7 years, our deductible went up significantly too. That is above average, but it happened. Employers cannot absorb the huge increases any longer (as this article points out) and must pass the costs on to their employees. And self-employed people are lucky to find coverage that is even close to affordable, especially if they have any pre-existing conditions.
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The current healthcare reform bill is a start. I hope they also incorporate some of the ideas from the Republicans for cost containment and tort reform. This is an issue everyone should be concerned about, it affects every single American.
Nov 8, 2009 at 5:32 p.m.
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"Just throw the $1.2 trillion plus cost of this wonderful "reform" on the national debt..."
Why would you suggest that? The CBO has estimated that "the direct spending and revenue effects of enacting H.R. 3962, incorporating the manager’s amendment, would yield a net reduction in federal budget deficits of $109 billion (rather than $129 billion) over the 2010-2019 period."?
http://cboblog.cbo.gov/?p=421
Nov 8, 2009 at 5:19 p.m.
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Hey, why not let the free market take care of it?
Nov 8, 2009 at 5:13 p.m.
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Yes Janesvillean, because as we all know the government does a bang up job of managing the other "businesses" that it has involved itself in. Just throw the $1.2 trillion plus cost of this wonderful "reform" on the national debt and give us a little warning before our taxes start skyrocketing.......:)
Nov 8, 2009 at 4:56 p.m.
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This is the reality. Health care costs are spiraling, and those who stand in the way of health reform will have to answer for it.
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