Spokane-area employers that provide medical insurance benefits say they've seen cost increases and made plan adjustments this year as in past years, yet with some significant differences amid the shifting landscape caused by national health care reform.

Looking ahead, some of those employers also say too many variables remain to allow businesses to plan significantly just yet for the next round of changes expected in 2013 and 2014 under the Patient Protection and Affordable Care Act, which also faces a challenge in the U.S. Supreme Court this year.

Meanwhile, costs for individual and small business employer-provided plans have had some of the largest recent yearly cost increases, on average from 14 percent to 18 percent nationally, says Ted Blotsky, a senior vice president for Associated Industries of the Inland Northwest. The Spokane-based nonprofit employers group offers to members a health insurance plan through ODS Health Plan Inc.

"Even if you're a business that has a good year in the area of health care costs, let's say the cost goes up 10 percent; in any business that's a huge factor," Blotsky says. "What does a business do? They either absorb that or shift that and have employees pay more toward premiums, or they adjust the policy itself with higher deductibles or higher co-insurance."

Others have changed insurance carriers based at least in part on higher costs. Paul Fish, president of Spokane Valley-based sporting goods retailer Mountain Gear Inc., says the company faced a substantial proposed cost hike, up 26 percent year over year, to provide 2012 health insurance coverage for its almost 100 employees.

"Our previous carrier basically had the biggest price increase we'd seen in years," Fish says. "They credited that increase to the federal health care plan for a big piece of it, so we ended up going with a company we felt was more in line with our values."

He adds, "We moved away from a for-profit medical health insurance company toward a nonprofit."

Avista Corp., which employs more than 1,000 people in Spokane County, didn't see an increase year over year for 2012 health insurance plan costs, says Mary Prince, manager of corporate benefits. However, it absorbed about a 1 percent to 1.5 percent hike last year adjusting to coverage for dependents up to age 26, an early provision of the federal health reform, she says.

Prince also says that another recent change because of those reforms included removal of lifetime maximums in its plan, such as if an employee incurred $1 million in claims, an amount that previously could be capped.

"We could potentially be paying more when an underwriter is helping us select a plan and look at costs," she says. "There is no ceiling on those particular costs. Realistically, most people aren't incurring $1 million in claims. Although unlikely, it's still factored in."

Prince says Avista probably didn't see a major cost increase this year because its health plan coverage has had a focus on paying for preventive care, such as covering annual physicals and well-baby care. The company also had previously provided coverage to dependents up to age 24 with no requirement that they be college students, prior to the federal steps, she adds.

Mercer, a benefits consulting firm that conducts a national survey of employer-sponsored health plans, says that large employers last year generally saw a lower average per-employee health-benefit cost increase than smaller employers did—averaging 3.6 percent compared with almost 10 percent, respectively. Mercer attributed that factor largely to small employers tending to have less-generous coverage than large ones and being more affected by the federal health reforms restricting annual benefit limitations and requiring free preventive care.

Mercer's survey, released last November, encompassed public and private organizations with 10 or more employees. It found that growth in the average total health-benefit cost per employee slowed in 2011 to 6.1 percent after reaching 6.9 percent in 2010, and calculated that last year's cost averaged $10,146 per employee. Mercer further reported that an average cost increase of 5.7 percent was expected for this year.

Overall, the federal affordable care act has numerous provisions set to go into effect over several years, with many beginning in 2014, assuming it isn't found by the U.S. Supreme Court to be unconstitutional.

Some of the provisions include requiring employers to extend coverage eligibility to all employees working at least 30 hours per week on average and automatically enrolling newly eligible employees. Individuals who aren't covered by an employer-sponsored plan, Medicaid, Medicare, or other public insurance programs will need to purchase and comply with an approved private insurance policy, or pay a penalty, unless they qualify for an exemption such as due to religious affiliation.

Firms employing 50 or more people that don't offer health insurance also could pay a fee of about $2,000 per worker, says Dr. Roger Stark, a health care policy analyst for the Seattle-based think tank Washington Policy Center. Also, he says a company with 50 or more employees may have to pay a higher fine of about $3,000 for each worker who qualifies for a future government health care subsidy.

New state-based insurance exchanges, to be operational by 2014, are expected to serve mostly individuals buying insurance on their own and small businesses with up to 100 employees, although states can choose to include larger employers in the future. The exchanges will act as an insurance broker, with prices and benefit levels set by the U.S. government, Stark says.

He says that families earning up to 400 percent of the federal poverty level—currently about $88,000 for a family of four—can receive federal subsidies for the purchase of health insurance in the state-based exchanges under the plan.

Stark says that under these federal reforms, many employers in the state may find that paying a fine, or tax, if they don't offer any medical insurance is cheaper than paying for employee health coverage. He says an average cost to insure a family of four was about $12,000 a year in 2011.

"The unintended consequence is employers will dump people into these exchanges," Stark predicts. "We'll move away from the employer model and move to an individual model, but pretty much dictated by the government."

He adds, "I think it's going to be much cheaper for employers to just get out of the health care insurance arena and not provide that benefit to their employers," unless for some reason, the federal government significantly raises the fine or tax farther down the road.

Prince says Avista may see some business cost increases after the state-based insurance exchanges begin in 2014, but the true impact is still somewhat uncertain.

"Some of that is hard to guesstimate until the health exchanges have been all set up and the criteria are defined," she says. "Since we have multiple states we do business in, we have to pay attention to each of those states. There's some criteria based on poverty level, but by the time they go into effect, that could change, so there's a lot of variables."

Starting in 2018, a 40 percent excise tax is scheduled to be placed on high-value health insurance plans, with $10,200 annual premiums for individuals and $27,500 for families, Stark says.

Prince says that is another potential effect that Avista will need to watch.

"Some of the biggest hits will probably be 2018," she says. "That's when we have to keep our eye on the excise tax issue, and find out where our plan falls into their excise tax criteria. But it will be recouped somehow, so we'll keep our eyes on if we reach that point."

It could affect how a health plan is designed down the road, Prince says.

"A lot of it is paying attention to what's changing and what's being clarified; there have been a lot of clarifications," she adds. "We're keeping our eyes on it and playing some 'what ifs' in our planning, but keeping in mind we want to do the right thing for employees and keep providing them with health care and focus on wellness, and as economically feasible as possible."

Stark says that one provision of the federal reforms in place allows for many small businesses with 25 or fewer employees to receive a health care tax credit under a qualifying arrangement if they pay half the premiums for health insurance coverage for workers. However, he says very few small business employers appear to be seeking these credits in Washington state.

"They're not doing the paperwork," he says, "or they're not willing to pay 50 percent of the employees' premium costs."

In general, another major trend is a movement toward more consumer-driven, higher deductible health care plans in which preventive care is covered, Blotsky says. He adds that often means an employer is purchasing a high-deductible plan, then setting up a health reimbursement account to provide dollars for medical care expenses outside of preventive care.

The Mercer study saw the same trend, finding that 2011 showed big increases in the adoption of high-deductible, account-based, consumer-directed health plans. The survey found 32 percent of employers with 500 or more workers offer such a plan, up from 23 percent in 2010. The number of small employers with 10 to 499 employees selecting such plans grew from 16 percent to 20 percent.