MSC incorporated as Premera Blue Cross, one of Eastern Washingtons biggest health-plan providers, has implemented a 24 percent rate hike for its small-employer pool, through which it serves about 50,000 workers in Eastern Washington.


Although the poolmade up of businesses or groups with one to 50 employeesrepresents a relatively small piece of MSC/Premeras overall customer base, the hefty premium increase served as a stinging reminder to at least some businesses here that employee health-care costs are continuing to rise unabated. Other examples abound.


Group Health Cooperative, another major health-plan provider here, hasnt implemented new rates yet for the coming year, but expects them to range, in terms of percentage increase, from 3 to the low 30s for small employers and around 9 percent overall for businesses, counting mid-size and large-employer groups, says Bill Akers, Spokane-based district manager for Eastern Washington and North Idaho.


Jim Stevenson, a spokesman in the Washington state Insurance Commis-sioners office, says another Eastern Washington health-plan provider, Regence Northwest Health, has notified the insurance commissioner of its intent to impose a nearly 11 percent rate increase for its small groups effective Jan. 1.


First Choice Health Plan, which has a small presence in the small-business market here and offers its plan mostly through associations, probably will be implementing average rate increases of 15 percent to 25 percent for all of its commercial clients, says Ken Hamm, its Seattle-based chief financial officer.


I would say theyre on more of an uptick (than usual). Theres a lot of pressure on all sides to boost payments to hospitals, doctors, and other providers that have been squeezed by lean Medicare reimbursements, Hamm says.


Stevenson says, Employers both large and small are pretty much on notice that they are going to be seeing double-digit premium increases for the foreseeable future. Thats because the cost drivers havent chang-ed, and managed care hasnt really shown itself to be that effective after the initial savings.


He cites three main cost driversthe aging population, the high cost of providing health care in rural areas, and an unrelentingly sharp rise in prescription drug expensesthat will continue to push health-plan rates upward.


MSC/Premera implemented the 24 percent increase for its small-employer groups on Nov. 1. Curtis Taylor, Spokane-based senior vice president and general manager for MSC/Premera, says the health-plan provider hadnt raised rates for small businesses for 18 monthssince May 1, 1999, when it imposed an 11.9 percent increasealthough it could have raised rates after one year.


He acknowledges that the latest rate increase is steeper than usual, but says, Weve just seen tremendous increases in the medical and drug costs and utilizations. I think its indicative of what were seeing industrywide.


To stay competitive, MSC/Premera has increased the fees it pays to doctors here by about 11.7 percent over the last 14 months, partly in an effort to bring those fees in line with the fees paid to Western Washington doctors, Taylor says.


The companys rate increases for larger-employer groups in the coming year will vary depending on each groups claims history, but probably will average around 15 percent, which would be up a couple of percentage points from last year, he says.


Premera Blue Cross, with which MSC/Premera is affiliated, provides health-plan coverage to about 100,000 small-employer group workers statewide, out of a total of about 1 million enrollees, Taylor says. He estimates that about 50,000 of those workers are in Eastern Washington, and about half of that number are in the Spokane area. Overall, MSC/Premera has about 252,000 enrollees in Eastern Washington.


Group Healths Akers says small-employer groups are a volatile market for health-plan providers, due to cost risks being spread over relatively small numbers of workers, and will remain volatile for the foreseeable future. Unfortunately, the largest percentage of uninsured people also is in that market, he says.


Akers contends that many providers are continuing to struggle, despite the sizable rate increases being implemented. He says Group Health, which serves about 80,000 enrollees in Eastern Washington and North Idaho, made a profit of just under 0.25 percent last year after several years of financial losses.


I think were going to do a little better this year, but we probably still wont reach 1 percent, he says.