Spokane-area businesses will be hit with health-plan rate hikes again this year to no ones surprise, but the storm clouds meager silver lining is that the increases will be smaller in some cases than in 1998.


Representatives of some of the Inland North-wests larger health plans say the rate hikes will range from about 4 percent to 15 percent. Averaging those figures, a typical premium increase of 9.5 percent this year would be consistent with the findings of a recent nationwide survey.


Thats below the double-digit leaps that were common at the beginning of this decade, but up from a couple of years ago, when premiums moved up only slightly, if at all, for most employers here.


Also, although some health-plan providers may impose smaller increases this year than they did last year, due to competitive market forces and reduced underwriting losses, the longer-term outlook is dour.


Were all seeing pretty significant increases in medical trend costs, with no discernible signs that the upward trend will ease soon, says Sharon Fairchild, president of Spokane-based Group Health Northwest.


The 13th annual National Survey of Employer-sponsored Health Plans, released late last month by benefits consultant William M. Mercer Inc., found that total spending on employer-sponsored health plans rose 6.1 percent last year, ending five years of negligible cost growth. Employers who responded to the survey predicted costs would rise even faster this year, with nearly three-fourths of them anticipating cost increases averaging 9 percent.


Depending on their experience ratings and other factors, some employers will see premium increases both belowand abovethe average rate hikes estimated by the local health-plan representatives.


Cynthia Norwood, CEO of Physician Hospital Community Organization (PHCO), a Spokane-based provider network, says some of the employers here with whom she has spoken claimed that their health-plan costs are rising from 16 percent to 42 percent this year. PHCO provides services directly to self-insured employers and also to some insurance companies that offer health-plans here.


Norwood and all of the health-plan representatives interviewed for this story cited prescription-drug costs, which continue to rise at an estimated 15 percent to 20 percent a year, as a big contributor to escalating premiums.


Its quite significant and, for the most part, its not in the control of the insurance companies or the health-care providers issuing the prescriptions, she says, adding, I think its going to get worse.


The rapid escalation of drug costs is due largely to the introduction of new products that are effective, but expensive, and to aggressive marketing by the pharmaceutical companies, Norwood says.


Some of the premium changes being implemented here by health-plan providers took effect at the beginning of the year, but many will be felt later, as insured groups reach their renewal dates.


Group Health Northwest


Group Health Northwest, the Inland Northwests largest health-maintenance organization, expects to raise rates on employer group plans an average of about 7.5 percent for its HMO service and about 10 percent for its point-of-service plan.


Its a much lower rate of increase than last year, when Group Health had an overall average rate increase of about 16 percent, Fairchild says. Over the last year and a half, Group Health has taken a number of cost-cutting steps, including dropping about 30,000 Central Washington customers, cutting some jobs, and closing a health-care center here.


Weve seen improved financial performance, but are continually looking at ways to become a more efficient operation, reducing administrative overhead, Fairchild says.


Group Health now has about 152,000 members in Eastern Washington and North Idaho.


MSC/Premera Blue Cross


MSC incorporated as Premera Blue Cross expects to boost its premiums mostly between 10 percent and 15 percent this year, which would be comparable to last year, says company spokeswoman Robin Valaitis-Heflin.


MSC/Premera Blue Cross was created last June when Spokanes Medical Service Corp. of Eastern Washington merged with Blue Cross of Washington & Alaska. The renamed entity has about 280,000 members, all in Eastern Washington.


Valaitis-Heflin says MSC/Premera Blue Cross is pursuing a number of cost-containment strategies. The first thing were trying to do is operate internally as efficiently as possible, which includes current efforts to standardize computer systems throughout the company, she says.


We also are going to be moving toward the use of more generic drugs to try to counter pharmaceutical cost increases, she says.


Separately, MSC/Premera is taking additional steps designed to help keep people from getting ill in the first place and to help members with certain chronic diseases to manage their health better, Valaitis-Heflin says. For example, it last year launched a new quarterly newsletter focusing on health and wellness, and it has started two new disease-management programs, for cardiac care and diabetes, she says.


Other health plans


Inland Northwest members of QualMed Washington Health Plan Inc. probably will see average rate increases of 8 to 9 percent, which is up somewhat from last year, says Chris du Laney, the companys Bellevue-based president.


The first and most simple reason (for the higher rate hikes) is every single carrier lost a lot of money (last year). We have to get it back. We cant keep operating as a public trust, du Laney says.


QualMed has about 75,000 members in Eastern Washington, adding about 20,000 Medicaid members last month.


First Choice Health Network Inc. is anticipating average rate increases of 4 percent to 6 percent this year for its Eastern Washington members, says David Peel, the Seattle-based companys chief financial officer.


First Choice has two primary products hereCostco Health Plan, which is affiliated with Costco Companies Inc. and sold through a call center, and Inland Health Plan, its main product, which is sold through health-insurance agents and brokers, Peel says. The company began doing business here only about a year ago and has about 2,500 Inland Northwest members altogether, but now is growing here at a rate of about 400 to 500 members a month, he says. One of its newest and largest employee-group accounts is Deaconess Medical Center, he says. First Choices medical services are provided by the previously mentioned PHCO.


Partnering with that organization has allowed First Choice to keep its rate increases lower here than in Western Washington, where the health-plan marketplace has been much more unstable, Peel says. We believe that having the (PHCO) physicians and hospitals tied in with the plan is going to make a long-term difference in rate stability for First Choice in the Spokane area, he says.


Another carrier, Regence Northwest Health, began writing business here only last April, and so has yet to do any contract renewals, says Tony Kahmann, its Spokane-based sales manager. However, Kahmann says the industrys typical rate increase statewide seems to be in the 8-percent-to-10-percent range.


Most carriers in the state have lost a considerable amount of money on several lines for several years in succession, and now are trying to recoup those losses, he says. Due to a softer investment market, carriers wont be as able to offset those losses with investment earnings, which could have a further effect on rates.


William M. Mercer survey


The nationwide survey of employer-sponsored health plans done by Mercer found that total health-benefit costs per employee topped the $4,000 mark for the first time in 1998, rising to $4,164 from $3,924 in 1997.


It said the cost increase was due to a number of direct factors, including a 13.8-percent rise in prescription-drug costs, but that it also reflected the end of a five-year migration of employees out of traditional indemnity, or pay-per-service plans into the managed-care arena of provider discounts and utilization controls.


On a regional basis, the West again had the second lowest average health-benefit cost per employee last year, at $3,626, which was higher than the South, at $3,438, but lower than the Midwest and Northeast, at $3,900 and $4,340, respectively, according to the survey.