Insurance: a race to keep up
If you’re feeling ill about the ever-increasing cost of health insurance or decreasing benefits, you may find some comfort knowing you’re not alone: affordable health insurance has become an oxymoron.
That’s small comfort in an environment where the average cost of health insurance increased from 14 to 19 percent statewide. The average annual cost of a family premium is $9,068 with employers picking up 73 percent of that and employees, 27.
The bad news? It’s going to get worse. Pick a business or an individual paying for his own health insurance expenses and you’ll hear about it. On top of that, the already complex world of premiums, co-pays, deductibles and preferred providers will get more complicated, experts say.
Health insurance rates have registered double-digit increases for the last three years, according to a statewide survey of employer health benefits.
The expense of insurance has employers, employees and health care providers pulling in different directions.
Employers typically provide insurance as an employee benefit and have to either increase the amount paid by employees or by the company, cut benefits or both.
It doesn’t seem to matter the size of the business. Even Vail Resorts’ operations in Eagle and Summit counties – with more than 9,000 insured employees and dependants – is feeling the pinch.
“Prices are going through the roof everywhere,” said Pat Donovan, director of corporate human resource services for Vail Resorts. “We’re not exempt from it.”
What Vail Resorts and other large employers are doing is largely the same as the steps taken by the thousands of small businesses across the region, with one important exception – Vail Resorts and many other local large employers are self-insured. They save by cutting out the profit an insurance company could realize.
“We’re the ones who decide what our rates will go up each year and don’t have the middle man to pay,” said Ann Kurronen of the Vail Valley Medical Center, which insures its 500 employees. “The flip side is we take on the risk.”
One thing self-insured companies can do is provide their employees with “richer” – or better- insurance terms. Self-insured companies can also customize insurance to its employees’ needs.
Eagle County self-insures its 389 employees, and it’s a plan private business would find hard to match. The steepest hurdles are finding the capital to start a program and having a large enough group of employees, 50 to 70, to spread out the cost of health care.
“We have a very rich plan,” said Carla Budd, with Eagle County human resources. The county has a $5 co-pay and the insurance will cover 100 percent for preferred providers.
Single employees pay $11.40 a month for premiums while an employee and dependant pay $32.70. It costs the county $310.60 a month for single employees and $1,152 per month for an employee with dependants.
Last year, the county spent $5.4 million on its insurance. This year those rates are going to increase 37 percent, Budd said, because the program had a lot of expensive claims.
Most self-insured organizations also purchase a “stop-loss” policy that insures the self-insured against huge claims.
Eagle County Schools self-insures 600 employees and, this year, has had to jack up its co-pay provision from $20 to $57 for single employees. The district pays 85 percent of premium costs, including medical, dental and prescription drugs.
Vail Resorts is increasing its premium to 12 percent, Donovan said.
More claims played a role there, too, Donovan said. The company pays 70 percent and employees, 30. Single, full-time or returning seasonal employee premiums cost $84, while an employee and three dependants costs $280 a month.
“Even though we’re self insured, we’re victims of an aging demographic and poor lifestyles across the country,” he said, noting the local population may be more active and in better shape and not have the same health problems that strain insurance across the country.
But increasing numbers of health care claims each year is not unique to the county. It’s a nationwide trend.
“It’s not so much that the expenses (of insurance companies) are increasing,” said Kirk Yeager of the Colorado Division of Insurance. “It’s the underlying claims. Providers feel they need to provide all sorts of treatments to make sure they’re not subject to malpractice claims.”
But there’s another trend driving costs, one that will only continue.
“It’s the graying of America,” said Susan Gambrell, deputy commissioner of consumer affairs for the Colorado Division of Insurance. “Baby boomers are getting older and utilize more services.”
Rates are increasing, too, because health care relies increasingly on new, expensive technology, Gambrell said.
“People expect the best,” she said. “We have a much more savvy consumer.”
And like a perpetual-motion machine, the higher costs drive another factor that is pushing up the price of insurance: uninsured people who receive medical treatment.
The cost of treating the uninsured is borne by those who have insurance.
And yet another impact comes from the rural nature of mountainous Eagle County. In a more urban setting, there is more competition.
Some large, self-insured companies seek a discount on medical care in return for designating a preferred medical provider.
Vail Resorts, which provides health, medical, dental and other coverage, has negotiated with and is still in discussion with providers.
“We try to manage costs by driving (business) to the preferred provider,” Donovan said. “We have favorable contracts and we try to drive as much volume into them through this “steerage.'”
That can create tension with health care providers because they’re faced with the same cycle of escalating costs. While none would comment, the Division of Insurance’s Yeager said, “It’s a love-hate relationship between providers and insurance.”
Gambrell said she believes the issue is becoming significant enough that it will begin to dominate the national political arena, where she believes a solution might be forged.
“More and more people in the middle class are being impacted by this,” she said. “It’s not just low-income people who are having trouble affording insurance. When that happens, it becomes a political issue. When enough people become uninsured it is no longer an issue of access to health insurance. It becomes an access to health care issue.”
She said the issues won’t go away and won’t become simplified either.
“Everybody wants a simple answer,” she said. “Affordable health insurance is an oxymoron.”
Cliff Thompson can be reached at 970-949-0555 x450 or firstname.lastname@example.org
Local coalition creating own plan
By Cliff Thompson
Local businesspeople and health care providers have been working on their own version of a solution to the rapid escalation of health insurance rates.
They are working to create a group insurance pool that could help reduce health insurance costs to participants.
In addition to potentially reducing the cost of health insurance offered by most businesses as an employee benefit, the proposal could also help insulate against rising insurance rates driven by outside forces. The problem is that it’s a complicated issue and will take six months or a year before it becomes available, organizers said.
“If we offer affordable insurance, more people will be able to keep insurance,” said Vail Resorts’ Pat Donovan, who has been working with the Vail Valley Chamber and Tourism Bureau and with local health care providers to develop the plan.
It’s essentially a bulk discount on an insurance policy, said the Chamber and Tourism Bureau’s Frank Johnson.
“We feel like we are pretty close to having an agreement between care providers and an insurance company and ourselves that will enable us to offer substantially discounted rates for health insurance coverage,” he said. “In the past, an insurance broker would come and underbid what others would bid, but in two or three years the rates would increase again.”
Johnson estimates as many as 3,000 people could participate once the plan is launched.
But getting to the launch will require what Donovan called, “a leap of faith,” both on the part of employers and health care providers who have to be willing to try the new program.
It’s not a self-insurance plan, Johnson said, because the cash required to establish a self-insurance pool is too great.
“If it was easy, it would have been done a long time ago,” Johnson said.