Inland Northwest businesses will find no relief this year from the now seemingly relentless rise in health-plan rate increases, with many employers here once again feeling the sting of double-digit premium hikes after a number of years in which some of them paid more minimal increases.


Representatives of several of the Inland Northwests largest health plans say rate hikes will average 10 percent to 12 percent here, which would be similar to the increases of last year in some cases and substantially higher in others. Depending on their experience ratings and other factors, some employers here will see premium increases either belowor well abovethat range, with some upwards of 20 percent.


Double-digit premium increases were common here in the early 1990s, but almost disappeared during the middle of the decade as a health-care reform push, the advent of managed care, competitive market forces, and other factors caused rates to level off briefly. Since then, however, amid various failed or abandoned health-care reform efforts, premiums have begun to climb sharply again as health plans have sought to catch up with spiraling health-care costs.


My perception is that a lot of the (health plans) are trying to get back into decent financial footing based on the last several years of operating losses. It just went too far, and were all paying for it, says Bill Akers, district administrator here for Group Health Cooperative.


Many health plans for a while put greater emphasis on building market share than on covering costs, believing that health-care reform legislation would cause a marketplace consolidation and having greater market share would pay off, Akers says. Looking back now, he says, Clearly that was a short-sighted and inaccurate assumption.


The health plans are not going to get that money back. Its gone forever, so it isnt a matter of them now trying to recover that lost revenue by padding premiums, Akers asserts. Rather, he says, they simply are more focused on balance-sheet concerns and are making rate adjustments that reflect year-to-year, health-care inflation.


He and other health-plan representatives here say they arent optimistic about a softening of that inflation in the near future, given escalating prescription drug costs, expensive new technologies, and no sign that consumers will reduce their utilization of health-care services.


The 14th annual National Survey of Employer-sponsored Health Plans, released late last year by benefits consultant William M. Mercer Inc., found that the cost of such plans jumped 7.3 percent in 1999nearly three times the rate of general inflationand is expected to rise by about 7.5 percent this year.


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


Group Health Cooperative


Group Health, the big Seattle-based health-maintenance organization, is boosting its rates by an overall average of about 12 percent here, but the increase is smallerabout 9 percentfor the medium- to large-sized employer groups it serves, Akers says. Both figures are about 2 percentage points higher than last years rate increases, he says.


Akers took over leadership of Group Healths Eastern Washington-North Idaho service area earlier this year. As of Jan. 1, formerly Spokane-based Group Health Northwest was folded into Group Health Cooperative.


Like other health plans, Group Health has struggled financially over the last several years. It announced last year that it was pulling out of 13 Inland Northwest counties for economic reasons. The district that Akers oversees includes just four Inland Northwest countiesSpokane and Whitman in Washington state and Kootenai and Latah in Idahoand just under 80,000 members. Group Health formerly had about 140,000 Inland Northwest members.


MSC/Premera Blue Cross


MSC incorporated as Premera Blue Cross is raising its premiums an average of 10 percent to 12 percent this year, which is similar to the average rate of increase applied to its plans last year, says Curtis Taylor, the companys general manager and senior vice president.


The amount of money that MSC/Premera Blue Cross pays out to cover health-care costs shot up by more than $1 billion last year, and general advances in medical technology are expected to continue to drive costs upward sharply, Taylor says.


The company has developed a three-tiered pharmacy program that it is offering to employer groups as an option as they renew their health-plan contracts this year, and its hoping that the program will produce cost savings in prescription drugs by encouraging employees to choose lower-priced brands.


MSC/Premera Blue Cross has about 285,000 members, all in Eastern Washington.


Regence Northwest Health


Regence Northwest Health, which offers a preferred-provider organization (PPO) health plan in Eastern Washington to about 20,000 members, also is raising its rates significantly, says Chris Bruzzo, a Seattle-based company spokesman.


He declines to be specific, but says, Just about everybody is getting a double-digit rate increase. I think its safe to say its in the low teens overall, but it could be a wide range based on the type of coverage and the size of employer you are. Theres no doubt that the increases are much more significant this year than they were last year.


Regence Blue Shield, the Seattle-based parent company of Regence Northwest Health, is working like crazy to hold down costs and for that reason neither it nor its Inland Northwest affiliate has been hit as hard by prescription drug increases, the most commonly mentioned cost culprit, as some health plans have been, Bruzzo asserts.


Nevertheless, he says, Were just literally seeing increases across the board. Utilization is up. Were seeing more of everythingmore doctor visits, hospital admissions, diagnostic tests, outpatient services. When we break down our claims, there isnt one (area) that isnt on the rise. I think thats important to note.


The aggressive entry of several national health plans into the Pacific Northwest marketplace a number of years ago had heightened competition and helped hold premiums in check for a time, Bruzzo says. However, those national health plans now are gone. Also, based on increasing public awareness of the health-care reform movement back then, I think there clearly was a period of time when we didnt expect utilization would continue to ratchet up the way it has, and we could bring rates along more slowly, he says.


That rationale, too, proved faulty. Now, a longtime cyclical trend in health-plan underwriting has disappeared, with the costs just continuing to go up and up and up, he says.


First Choice Health Network


First Choice Health Network Inc., which has about 3,500 members here says that most of its actual rate increases will span the range between about 8 percent and 20 percent.


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. First Choices medical services are provided by Physician Hospital Community Organization (PHCO), a Spokane-based provider network.


PHCO provides services directly to about 12,000 employees of self-insured companies in Eastern Washington and North Idaho, as well as to First Choices members.


Cynthia Norwood, PHCOs chief executive officer, says that organizations rates are going up an average of 4 percent to 8 percent this year. Thats a lower range of increases than for most other health plans here, but Norwood says the figures may be misleading because PHCOs rates are based on actuarial data and may be higher to begin with than those of some health plans that are imposing larger rate increases.


Weve heard of increases from 8 percent to 25 percent that some other employers will be paying, with the average probably being between 12 percent and 18 percent, she says. Health-care providers have been working very hard to eliminate redundancies and waste, but such waste now is getting harder to find.