'Perfect storm' brewing in health insurance: As premiums skyrocket, millions face losing coverage

Seattle Post Intelligencer ^ | May 20, 2002 | LARRY LIPMAN

[sarcasm]

WASHINGTON -- Health analysts call it "the perfect storm."

Like the deadly weather pattern that struck the Northeast in 1991, a confluence of skyrocketing insurance premiums, a shaky economy and rising unemployment is swamping American businesses.

As companies try to cope over the next several years, millions of workers and retirees will find themselves uninsured or paying a greater share of their health insurance costs.

For many, employer-provided health insurance will follow the path already taken by employer-provided pensions. As with 401(k) retirement plans, employees will assume more responsibility for their own health care by choosing what kind of insurance coverage and how much medical care they will receive.

Political analysts view the health insurance storm as a potent campaign issue, reminiscent of the early 1990s health care crisis that helped propel Bill Clinton into the White House.

But mindful of the disastrous Clinton health reform proposal, which many people say cost Democrats control of Congress in 1994, neither the Bush administration nor congressional leaders have shown any enthusiasm for tackling the health insurance crisis.

The storm winds are blowing from many directions.

Health insurance premiums this year are expected to increase an average of 13 percent to 15 percent, the steepest increase in a decade. That's on top of average increases last year of 11 percent.

And it's likely to get worse. Next year's increases will be at least as high as this year's and probably higher.

Some consumers already are being hammered.

The California Public Employees' Retirement System -- the nation's largest health insurance plan after the federal government's -- recently announced a premium increase of 25 percent. Other insurers have posted increases more than twice as large.

The size of the CalPERS increase set off alarm bells throughout the country.

"If the second-largest purchaser of health care in the nation... can't negotiate better than a 25 percent premium increase, what in the world is going to happen to the rest of the businesses?" said Pat Schoeni, director of public affairs for the bipartisan National Coalition on Health.

Other analysts say the CalPERS increase is not a bellwether for the industry.

Because the program was able to restrain premiums below national levels for several years, they say, the new rate merely represents a catching-up by insurance companies.

At least five factors are generally blamed for the steep increases in premium costs:

• Aging baby boomers. The first wave of the 77 million Americans born between 1946 and 1964 are already reaching their mid-50s and are requiring more care. Today's boomers are demanding expensive cutting-edge medical technology and are being influenced by consumer-oriented advertisements for prescription drugs.

• Decline of managed care. Hailed a decade ago as a controlling force in medical costs, health maintenance organizations have fallen on harder times.

  While managed care was able to hold premiums flat during much of the 1990s, it wasn't able to restrain the underlying growth in health care costs, particularly in prescription drugs and hospital costs.

• Rise of hospital providers. Managed care led to a consolidation of health care providers, which have turned the tables on managed care organizations in negotiating payments.

  Where HMOs once threatened to exclude individual hospitals that didn't meet their pricing demands, now hospital groups are threatening to exclude HMOs.

• Wall Street cycles. Managed care groups were a hot investment in the '90s because their enrollment growth drove up profits. But enrollments have been declining, so companies are now looking at higher prices to maintain profits.

• State and federal government mandates. Insurers and business groups blame premium increases on burgeoning state and federal mandates regarding which health conditions must be covered. The Bush administration's recent decision to treat mental illness on a parity with physical illness is seen by many groups as another good intention that will cost employers and employees more.

  

  But rising premiums are not the only element in the health insurance storm.

  The unemployed often lose their health insurance or are unable to afford temporary insurance plans. The most recent figures show unemployment at 6 percent nationwide, but higher for some groups.

  Families USA, an advocacy group for broader insurance coverage, recently estimated that the major corporate layoffs during 2001 resulted in 2.2 million more workers losing insurance coverage.

  That means there are about 41 million uninsured Americans, said the group's executive director, Ron Pollack.

  In a paper published in November, the National Coalition on Health Care predicted that the weakened economy, exacerbated by the impact of the Sept. 11 terrorist attacks, might result in 6 million more Americans losing health insurance by the end of this year. Over the three-year period of 2001 to 2003, 86 million Americans could temporarily lose their health insurance coverage, the coalition predicted.

  "We think the perfect storm is upon us and may be getting even worse," Schoeni said. "If this was not a bad recession -- if this was a small blip and we're doing this badly -- I don't know what a big blip would do to us."

  Many workers will pay more

  Businesses are responding to the premium increases in a variety of ways, but the bottom line is likely to be higher costs and more choices for workers and retirees.

  Employers generally refrained last year from asking workers to assume a greater share of the premium costs, deductibles or co-payments, said Paul Fronstin, director of health research costs for the Employee Benefits Research Institute.

  But he noted growing indications that employers are forcing workers to carry a greater share of the costs.

  A survey of employers conducted by Hewitt Associates, a global management consulting firm, found that employers are expecting an average annual premium increase over the next few years of about 13 percent, but they're only willing to pay 8 percent of that increase.

  "You look at that kind of gap and ask who is going to pay for it, and the answer is the employee," said Ken Sperling, Hewitt's health care practice leader.

  A Hewitt report last October predicted that many companies this year will pass on at least 25 percent to 30 percent of their premium increases to employees, which means increases ranging from $186 to $463.

  Businesses also are considering passing along higher deductibles and co-payments to make employees aware that prescription drugs and doctor visits cost far more than the $5 or $10 that many workers pay.

  Dave Romans, a senior consultant with the consulting firm Watson Wyatt Worldwide, noted that "63 percent of employees underestimate the total cost of health care, and 69 percent overestimate how much of a share of health care they are paying."

  One way of making employers realize the cost is to shift from co-payments to co-insurance, says Jamie Robinson, a professor of health economics at the University of California, Berkeley.

  A co-payment is a fixed fee, such as $10 for a doctor visit. Co-insurance requires the patient to pay a fixed percentage of a medical service's cost. That puts the burden of selecting services based on price more squarely on the patient.

  Writing in the March edition of the health policy journal Health Affairs, Robinson said the shift to consumer-driven spending is designed to promote the view that "health care is a scarce resource in need of priorities rather than an unlimited entitlement for which someone else can be forced to pay."

  Choosing coverage

  An even broader shift may be coming regarding the way workers choose health care coverage.

  Instead of "defined benefit" plans in which employers buy a health insurance policy and employees pay a share of the premiums, there is a growing movement toward "defined contribution" plans.

  Under such plans, the employer puts up a certain amount of money, and workers buy health coverage and services from a menu of options.

  One consumer-directed model is a medical spending account.

  Under this model, an employer contributes a fixed amount into a worker's accounts. During the year, the worker pays all medical bills out of this account. When the account is exhausted, the employee is responsible for all subsequent expenses up to some "catastrophic" level, above which insurance takes over.

  Workers who do not exhaust their account in one year roll the remaining money into next year's account.

  "I would estimate we're going to see 5 to 10 percent of the Fortune 500 companies implement" such plans next year, said Romans of Watson Wyatt.

  "It's gaining a lot of traction just because of what is happening in the health care world. Employers are looking for a solution, and this is one of the solutions that is floating out there."

  Another model allows workers to buy "multi-tiered" coverage under which the amount of their co-payments depends on the cost of hospital treatment and drug treatments they receive. High-cost hospitals and name-brand drugs require a higher co-payment.

  Sperling, of Hewitt, said "employers are interested in the new models, but they're not interested in throwing away" their managed care and other insurance plans. Instead, they're offering the new plans to workers as an additional option.

  He noted that "the market is not convinced yet that these models will be effective in lowering costs."

[Puddleglum]

The only solution I can see is a Market Oriented Solution: ELIMINATE THE 3RD PARTY PAYERS. As long as “someone else” is paying, users demand “more of everything,”and providers raise costs without being scrutinized. The exact same situation exists with tuition for higher education.

I agree entirely with this. I also think that we need tort reform to bring down costs so that people don't need to be so dependent on insurance for their basic medical needs. Somehow we need to redraw the distinction between medical tragedy and cash-cow opportunity. Maybe limit the amount layers can collect personally for every agrieved individual they represent, you know, just to ensure they're doing it for noble reasons and not simply exploiting someone's suffering

[SteamshipTime]

I keep telling him to change his screen name to "classicalliberallarry."

[QuestionBureaucracy]

Government interference has made both medicine and individual insurance expensive. When employer-sponsored group plans got tax favored status the individual market began its descent into irrelevance. The government put the self-employed into the worst possible position risk-pool wise and didn't even bother offering any tax relief. Then the government turned every emergency room into a free clinic for those who couldn't pay, with their costs getting passed along to others, especially those who pay out of pocket and can't negotiate prices up front. Then the government unilaterally sets its rates for that part of the of the population covered by Medicare and Medicaid further forcing providers to raise rates where they can. Between the VA, HHS, DOD, the Indian Health Service, and the plan for federal employees, the government already controls the better part of the market. Instead of continuing to screw those in the individual market, we would be better off if we consolidated all of the redundant government plans and had the government negotiate contracts with insurance companies for a single national risk pool with an annual open season during which time individuals could choose to enroll themselves or their families at the same premium rates as the government negotiates for its beneficiaries and with the same tax treatment.

[SteamshipTime]

think you've missed an essential point. Most people simply cannot afford modern medicine. Not because of government interference but because it's really expensive. Like a Rolls or a Ferrari.

I respectfully disagree. Market economics have pushed down the price for any complex technology you can name (beer, cars, air travel, electricity, air conditioning, 4 bedroom homes, etc.) In fact, practically the only area where medical costs have declined is for uninsured, voluntary procedures: breast implants, Lasik vision correction, etc., all of which were previously limited to the extremely wealthy.

As you correctly point out, the will to live and the natural law right to one's own life renders it difficult for people to accept that good health is a scarce commodity. Solace for this uncomfortable, inescapable fact of existence can be had, among other places, in the teachings of Christ.

[ThreeOfSeven]

The practice of medicine, law, and public education all suffer from the same problem. They're all monopolized by licensed professionals. Licenced medical doctors have a government enforced monopoly over the practice of medicine. Licensed lawyers have a government enforced monopoly over the practice of law. Licensed teachers have a government enforced monopoly over education. The only way to approach a free market in any of these fields is to break up the professional mandarin classes that control them. Even if these areas can't be fully deregulated, they should be opened up to competition by lower cost providers.

[Dick Bachert]

If YOU are one of those who has fallen through the widening cracks in the rapidly worstening US healthcare industry and need medical treatment, try this: PAY CASH!

Nearly every doctor we visited during OUR trip through the cracks passed on about a 30% FEE REDUCTION for NOT having to fight with some third-party payor/insurance company for his dough. That's about what the current system adds to his office overhead to TRY to collect on claims. See all those NON-MEDICAL folks in his office? There ya go!

Check with your guy's office or business manager before coming in and I'll bet you find the same thing.

And don't forget to ask for some of the FREE SAMPLES the drug companies give ALL doctors. It's been established that 85% or more of the medicos here HAVEN'T A CLUE AS TO THE COST OF THE DRUGS THEY PRESCRIBE SO LIBERALLY.

[Free the USA]

Check the Bump List folders for articles related to and descriptions of the above topic(s) or for other topics of interest.

[Mamzelle]

Here's something you won't see added to the causes of the rising cost of medical care :

The sudden uptick of women in medicine has led to a DECLINE in the numbers of---

1) Hard-driving medical specialists such as surgeons, neurosurgeons, OB/gyns who still deliver babies, and other specialties that involve unpredictable schedules and great physical demands.

Interestingly, skyrocketing malpractice premiums lead to the lack of the same sorts of specialties. These are high-risk medical professionals who don't make any more than the other professionals.

Women want predictable work hours, and a surgeon on call just won't live that kind of life. Not to mention that a higher number of women docs just plain quit if they happen to marry another doc...

So. Don't break your backs, fellas. And don't have babies, gals...

[Mamzelle]

RE:Nearly every doctor we visited during OUR trip through the cracks passed on about a 30% FEE REDUCTION)))

Your doc may or may not be aware, but this will get him into very hot water...

[SteamshipTime]

How so? (I knew we lived in a socialist state, but I never would have thought it was THAT socialist).

[mewzilla]

Here's another point I have seen mentioned yet: how about the increasing number of folks who abuse their bodies (obesity, tobacco, drugs, alcohol), then expect their insurance companies to pay through the nose to keep them alive, usually while the patient refuses to live a healthier lifestyle. I'm tired of seeing my premiums jacked so some idiot can commit suicide slowly.

[scholar]

Your doc may or may not be aware, but this will get him into very hot water...

How so? I know that a doc accepting assignment from Medicare has to be very careful about fee schedules to recipients. However, I am not aware that there is anything that prohibits a doctor from negotiating a fee with a self-insured patient--just the same as he negotiates with the various insurance plans with which he participates.

[Mamzelle]

Re: How so?)))

There are regulations that prevent a doctor from discounting. Discounting one patient, you see, means that he's "overcharging" the insurance companies . The HMOs and others would then have the means to cut his fees to the discounted rate he gave you, which would surely drive him out of business when they then take their cut out of the lower fee! Medicare is particularly sticky on this...you can't even deal in the kind of transaction at all with someone over 65, or the doc risks being cut out of Medicare altogether.

They call it "fraud" and it is certainly absurd and unfair. But you're talking rich greedy doctors..

[Ohioan]

You cannot understand the trend in Health Costs, without addressing the ongoing legacy of Medicare. It has changed the whole mindset, as well as the cost structure, behind medical services in America. (See Medicare--Panacea or Death Potion?)

It is another of the great Unconstitutional programs that are creating enormous problems in America today.

William Flax Return Of The Gods Web Site

[parsifal]

"countless needless procedures done to CYA against the shark malpractice lawyers."

From Brittanica: Shark malpractice lawyers are scavengers. They feed off the remains of inept and sloppy medical providers. In doing so, they perform a vital service for the ocean community by removing sick and unhealthy doctors from the environment.

[galt-jw]

the problem is far worse, but as i have said before, stupidity, and the failure to think correctly, is fatal...the next thing to happen is that the best and the brightest no longer desire to practice medicine, because they are poorly paid by hmos, and opt for fields more lucrative than medicine.

and then, standards will have to be lowered, as in the mililtary and police, so the person treating your illness tomorrow is the gum chewing, eye pierced, extasy taking raver dingbat of today....

take your vitamins and have a happy day.

[galt-jw]

talking rich greedy doctors

in days before hmos, and all the other cost increases, medical visits were much cheaper. the most competent people in society are the most productive. these are the people who are able to produce the miraculous advances that save lives today. they are the surgeons who steal life back from terminal patients etc. daily. if you dont think what they do deserves compenstation in terms of a free market, which this ceased to be long ago, then remove all the artificial costs which lead to the inflated costs of today.

[Mamzelle]

(further discussion, likely more than you want to know) Interestingly enough, these regulations became quite difficult for the honest to navigate not due to Clinton, but to a Republican Congress under Gingrich who desired to get tough with "cheating" doctors who overbill...came about in the later nineties...Remember that big medical group...(the name escapes me but does it sound like "Columbia"?) that got hit bigtime, to the greater glory of the investigating feds?

Having one patient billed one way, and another patient billed another way is an invitation for some regulator to assume that some cheatin' is going on. Local prosecutors can earn themselves a nice political boost by bashing up a local doctor who finds himself accused of overbilling patients. That the doc only ends up ruined, not in jail, is not much comfort...although it is theoretically possible that he can end up in jail, too.

Even well-intentioned physicians can find themselves visited by the feds and the HCFA dudes, ready to carry out your files in cardboard boxes...An entire "compliance" industry of lawyering has sprung up to try to help docs figure out how to obey laws that don't make much sense to anyone, especially not the lawyers themselves, who aren't nearly as intelligent as we give them credit for.... Hiring these compliance firms is a useful demonstration of "good faith" when the feds descend upon your practice, even if their advice isn't worth what you're paying for.

Keep in mind, that these compliance firms fees are part of the expenses that get passed on to the patients. Ain't lawyering grand?

BTW, the lawyers can discount their fees any way they please. :' )

No businessman should assume that the law has any common sense.

[Landru]

"However, I am not aware that there is anything that prohibits a doctor from negotiating a fee with a self-insured patient..."

~Yet.

"...just the same as he negotiates with the various insurance plans with which he participates."

Remember what we spoke of in a prior discussion concerning the American Leftist-Socialist's attempt(s) to *break* our system?

Well?

Phase One: Remove free market rules governing the Healthcare Industry.
Phase Two: MAKE healthcare a, "right."
(1 & 2 totally interchangeable...)

That'll give us Socialized Medicine if they pull this off -- no matter WHAT they wind-up calling it or WHO we're told they're "trying to reach" -- which'll be *precisley* how this thing shall be marketed to the American masses.
~Just watch & see.

This attempt is, IMO, but-one of the Liberal-Socialist's multi-pronged attacks upon Capitalism; targeted at a specific industry but, designed to capture the whole magilla in the end.

Hillary-Care is alive & well.
(& now a *Big* thank you to the citizens of New York is in order too for allowing that monster-bitch to run amok.)

This happens here?
The Canadians can finally stay home for own healthcare, eh?

...& just think of the gas savings. {g}

[Mamzelle]

Surely, even the most obvious sarcasm and irony must have the obligatory --sarcasm alert-- please to excuse.

Though I must point out that I'd rather have today's medical care than when it was much cheaper. Were I to have a heart attack today, I'd stand a good chance of walking out of the hospital a few days after being admitted. Years ago, I'd likely be a goner. yay, nsaids...

We do pay more, but we get more. The harsh truth is that we were brought up with a sense of being entitled to the best health care in the world--it must be paid for in one way or another. As a nation, much of the cost of our medical care includes all the expensive things we have put in place to AVOID that harsh truth...lawyers, regulations, socialism...