CRANSTON, Tuesday October 19 - I received an email regarding a 40% renewal rate hike for Boeing's health insurance plan, along with the mention of a meeting of Rhode Island's Health Insurance Advisory Council, to take place at 4:30 pm in Cranston, where the state's three primary insurers would present information about "system affordability standards" and explain the current renewal rates. Clearly, I was meant to attend this meeting, so I did. What an eye-opener!
How are rates set? By law, per person rates for a small business, of under 50 employees , are set based upon the (1) cost of benefits for a given plan, (2) the average annual inflation rate for health expenses, (3) the average age of the group, (4) the mix of men and women in the group (the greater the proportion of men, the higher the rate because of incidence of mortality), and (5) usage (somewhat driven by increasing incidence of disease due to obesity, poor nutrition, and sedentary lifestyles).
What is the anticipated inflaton for this year? For groups renewing in 2010, the inflation rates approved by the Office of Health Insurance Commissioner (OHIC) were 9.8% for Blue Cross Blue Shield, 6% for United Health, and 9.3% for Tufts Health. The market forces currently at work will drive these rates up even further in 2011.
How much does an aging employee group affect renewal rates? If you are a small group, there's a good chance have a higher proportion of older workers than last year, especially since people are finding they can not retire as early as they may have planned. I've seen the aging factor add as much as 5-6% to a renewal rate.
What about the costs of federal health reform? All policies issued must now cover dependent children up to 26 and all preventive care without a copayment. This is estimated to add an additional .6 to 2.25% to a company's premium costs. But this one item only scratches the surface of the effects of the new legislation - you've seen all the big companies negotiating health-care waivers because the costs are too high - but that's a subject to be tackled at another time.
What about insurance company profits? Actually, BCBSRI posted a loss of $100 million last year!
But back to the meeting: It focused on increasing the percentage of insurance reimbursements aimed at Primary Care Services, this to centralize care with "Medical Homes," a new pilot program. The meeting also focused on investing in electronic record keeping. While these ideas seem well-intentioned and may begin to take us in a better direction, there are far more pressing issues to address when it comes to "affordability."
Ten minutes were reserved at the end of the meeting for public questions and comments. I stood up to take a show of hands: "How many people in the room were on high deductible health plans?" How many hands do you think went up? I'll tell you, just one. A small business owner behind me raised his hand. I could only imagine that everyone else in the room was fully-covered by the goverment, a major insurance provider, or an owner of an extremely profitable company who wasn't yet worried about affordability. None of these people seemed to understand what "affordabilty" means to the man/woman on the street, regular folks trying to absorb double-digit increases to a major line-item in their household budget while their income stream is not keeping up.
Then I described my recent experience at Kent Hospital (over $500 to wrap a sprained ankle at the emergency room - see "Health Care Costs" linked below). Why can a hospital get away with charging that much for a sprained ankle? Because people with full medical coverage don't care how much it costs. Their insurance picks up the tab. Unfortunately, those attending the meeting - the very people whose coverage insulates them from the reality of these costs gone berserk - did not seem to appreciate just how much waste they tactily condone by buying into the existing system. And they have not seen the lack of transparency in hospital billing to which I have been witness.
It has been my experience that a high-deductible health plan, paired with health savings account, will help ease out-of-pocket expenses, encourage preventive check-ups and tests, increase consumer awareness, and thus promote competition among providers. To learn more about how these plans work, click here.
If you want to read more about my emergency room experience, see HEALTH CARE COSTS.
