Many Spokane-area employers who had hoped for some respite this year from double-digit percentage increases in their health-care plan premiums likely are finding themselves mightily disappointed.


Representatives for several of the Inland Northwests larger health plans say that rate hikes this year are ranging mostly from about 7 percent to the mid-20 percent area for businesses here, depending on their size, claims experience, and other factors. An assumed typical percentage increase in the mid teens, or the middle of that range, would be somewhat higher than the average increase projected in a recent nationwide survey.


Even that ballpark figure probably is misleadingly low as far as the majority of this areas small businesses are concerned, suggests Spokane benefits consultant Mark Newbold, of Corkery & Jones Benefits Inc., which serves about 350 Inland Northwest employer-employee groups.


The community groups (employers with fewer than 50 employees) are really getting hammered right now. Theyre in the 20- to 30-percent range, average this year, which probably is up from an average premium increase of around 15 percent to 25 percent last year, Newbold contends.


Furthermore, many of the employers that are holding premium increases to lower percentages are doing so only by restructuring their benefit plans to reduce costs, such as by raising the employee co-payments and deductibles, he asserts.


You negotiate a plan that is less than you had to offset that rate increase, he says.


One slightly larger employer here that has had to adopt such an approach is Pyrotek Inc., an industrial-products maker that serves the struggling aluminum industry and employs about 70 people in the Spokane Valley.


The company had faced a 25 percent premium increase this yearon top of a 15 percent increase last yearbut managed to hold premiums to no increase by tightening its benefits package, says Joe Roberts, a senior engineer who has helped oversee that companys benefit-plan negotiations.


Weve decreased the benefit package, just kept trimming it down until we could get the increase within the ability of the employees to pay. Every year weve done something different, Roberts says. This spiral cannot continue. There is just no question.


Some health plans are imposing smaller increases this year on average than they did last year, when typical overall premium hikes ranged broadly from around 10 percent to the low-30 percent area, representatives say. None of those interviewed, though, foresee any trend toward sustained relief from soaring premium hikes, given still-escalating prescription drug costs, expensive new medical technologies, the aging population, and an unwillingness by consumers to reduce their use of health-care services.


The reality is, consumers are using medical care more frequently, and were seeing a higher cost for those services, says Curtis Taylor, Spokane-based general manager and senior vice president for MSC incorporated as Premera Blue Cross, one of Eastern Washingtons largest health-plan providers.


Furthermore, since the dismantling of health-care reform legislation in Washington state in the 1990s, no major proposed cost-containment program has emerged thats been able to garner broad political support, health insurers say. The nation as a whole, though, has experienced that same inability to rein in costs.


An annual National Survey of Employer-sponsored Health Plans conducted for New York-based benefits consultant William M. Mercer Inc. found that the premiums paid for such plans jumped 11.2 percent in 2001and are expected to rise 12.7 percent this year.


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


Rate hike breakdown


MSC/Premera Blue Crosss health-plan premium increases this year will range on average mostly from the low to mid-teens in percentage, Taylor says. That would be up a bit from an estimated overall average of 10 percent to 12 percent last year, he says. In November 2000, however, as the Journal reported earlier, MSC/Premera Blue Cross implemented a 24 percent rate hike for its small-employer pool, made up of businesses or groups with one to 50 employees.


The story is, rates are driven by medical costs, he says. The Spokane-area population is getting older, few new businesses that draw younger, healthier people are moving into the area, and that has caused per-capita utilization of health-care services here to grow, he says.


MSC/Premera Blue Cross has about 280,000 members, all in Eastern Washington.


Premera Blue Cross, with which MSC/Premera is affiliated, plans to introduce a new product line statewide this fall that will offer consumers more choice on how to spend their health-care dollar and provide simpler, technology-enhanced administration, Taylor says.


Group Health Cooperative, the big Seattle-based health-maintenance organization, which has about 82,000 enrollees in Eastern Washington and North Idaho, is boosting premiums this year by an average of about 7 percent for businesses with fewer than 50 employees and an average of about 12 percent for mid-sized and larger employers, says Greg Swint, Group Healths Seattle-based executive director for marketing and sales.


Thats slightly higher than last year for large employers, but lower for small employers, who faced mostly double-digit increases last year, he says.


Aside from the traditional culprits mentioned earlier as contributing to the premium increases, he says, I think Washington state mirrors the rest of the nation in that providers (who have been squeezed by Medicare and Medicaid funding reductions) are demanding higher reimbursement.


Swint predicts that, with the labor market having softened, employers this year will be shifting more health-care plan cost increases onto their employees than in the recent past. When the labor market was tighter, and companies were more focused on attracting and retaining the best employees they could find, they were a little more hesitant to do that, he says.


Regence Northwest Health, which serves about 23,000 members in Eastern Washington, most of them in the Spokane metropolitan area, will be imposing rate increases here mostly in the range of 10 percent to 20 percent this year, says Chris Bruzzo, a Seattle-based spokesman for the company. Thats less on average than last year, he says.


Prescription drugs are growing faster than anything else, he says. Overall costs are up, too. Doctors and hospitals are legitimately asking for increases in what we pay them, and those are getting reflected in the rates.


First Choice Health Plan, which has a small presence in the small-business market here and offers its plan mostly through associations, is imposing rate increases this year ranging in percentage from the high teens to the mid-20s, which is similar to last years increases, says Ken Hamm, its Seattle-based chief financial officer.


We would have expected that to moderate this year, but costs have risen more than expected, with greater use of outpatient services accounting for much of that increase, Hamm says.


Beth Berendt, deputy commissioner for rates and forms in the Washington state Insurance Commissioners office, says, I think in general the rates are continuing to climb at fairly significant levels. Its a very challenging time, of course, in that nothing has substantially changed to mitigate rates, to slow down the increase in health-care inflation. Things are pretty grim.


She adds, A lot of people put political capital into health-care reform in those early days (before it was quashed), and theyve been burned, which has led to a paucity of new market-reform recommendations. Nevertheless, she says, The reality is, the crisis is here, its now, and we need to step forward and look at it.


One proposed solution


Seeking to rekindle a health-care reform debate and avoid a fast-approaching catastrophe, Berendts boss, Insurance Commissioner Mike Kreidler, recently urged consideration of a plan that would require all state residents to carry at least minimal health-care coverage. He proposes that a pooled community rating be used to spread the premium costs evenly across the estimated 500,000 state residents who currently are uninsured.


Don Brunell, president of the Olympia-based Association of Washington Business, has countered that such a plan wont work, partly because community rating offers no incentives for making good health-related choices and no consequences for risky behavior. He also predicts that state lawmakers and regulators wouldnt be able to resist loading up the envisioned taxpayer-supported minimal, basic care plan with a host of broader benefits, as he contends occurred with the states Basic Health Plan.


He suggests, instead, that more effort be put into changing federal tax codes, so people can deduct all of their health-care costs, and into increasing the use of medical savings accounts so people can have more control over how their health-care dollars are used and also earn real dividends for staying healthy. In addition, he recommends working to develop flexible and more affordable insurance plans tailored to individuals and age-group needs.


The Seattle Times, in an editorial, also responded to Kreidlers proposal skeptically, suggesting it would be resented widely, difficult to enforce, and make Washington the only state in the nation that mandates health insurance for all of its residents.


In the Legislature, Seattle Sen. Pat Thibaudeau, chairwoman of the Senates Health and Long-Term Care Committee, this session introduced a resolution calling for a broadly representative 17-member group to examine health-care insurance in Washington and to develop recommendations for its improvement.


That resolution failed to get a hearing, suffering the same fate as House Bill 2430, which had been supported by business groups and would have created new insurance plans with limited benefits to lower the cost of insurance for businesses with fewer than 25 employees.


An even higher-profile piece of legislation with potentially sweeping health-care implications, House Bill 2431, also appeared to be all but dead last week after missing a deadline for passing the House. However, a like-worded companion bill passed the Senate and still was alive early this week.


Those bills propose creating a comprehensive prescription-drug education and utilization program that would seek to tighten prescription-drug benefits for Medicaid and other state-funded plans by requiring state agencies to work from a preferred-drug list. Such a list, the bills sponsors contend, would allow the state to use the free market, rather than regulation or cost controls, to encourage price competition and reduce drug costs.


State-funded drug costs for people covered by Medicaid, childrens health-insurance programs, and other medical-assistance programs, as well as for the medically indigent and state employees, are expected to increase by 34 percentto nearly $1 billionin the current biennium. Thats on top of a 51 percent increase in the 1999-2001 period.


The legislation would apply first to about 500,000 Medicaid fee-for-service patients and to state employees, then would be extended to agencies that buy prescription drugs in bulk, such as the Department of Corrections for the prison system and the Department of Social & Health Services for mental hospitals. After a year, local governments, private companies, and people without insurance also could apply to join the purchasing cooperative.