By Audra Distifeno for TCAJoB
Healthcare premium costs are blamed for an overall increase in underinsured Americans in recent years. Both employers and employees are feeling the crunch on their pocketbooks as rising healthcare premiums permeate the nation.
Researchers say national healthcare reform will hit hard in 2014, undoubtedly causing even further increases.
“Generally over the past six to 10 years, we’ve seen an 8-12 percent increase each year,” said Gordon Beecher, Richland’s human resources director.
Two years ago, officials of the self-insured city, formed a committee to explore cost-saving measures.
“We asked ‘What would be the most palatable to our employees?’” said Beecher.
The Healthcare Cost Containment Committee, comprised of employees from each of the city’s six unions, non-union members, management, non-management and union representatives, worked diligently to contain healthcare cost escalation.
“We’ve estimated that we can cut that (8-12 percent) in half to between three and four percent this year. But last year’s national Healthcare Reform Act (provisions) will add a couple percent, which offsets some of our savings,” said Beecher. “We’re shooting for a 4-6 percent rise instead of 8-12 percent.”
Two major undertakings by the city have saved employees from paying more for healthcare. The first was cutting costs by 12 percent after renegotiating with Walgreen’s, administrator of the city’s prescription drug program. Secondly, the city renegotiated its long-term disability policy costs with no change in employee benefits and also renegotiated with another stop-loss carrier.
“We’ve done everything we can do to lighten the costs for employees,” said Beecher. “Overall, we’ve established half the total savings just on renegotiating and re-pricing and the other half will have to be absorbed by the employees. It’s all subject to collective bargaining, which we’re just beginning, but I expect we’ll have good cooperation from our unions.”
The city has experienced some relief from the federal government’s “Early Retiree Reinsurance Program,” but this will be gone sooner than later. The $5 billion pot is earmarked to discourage organizations from dropping the plans due to rising costs.
“The challenge is that 3,600 organizations participate and we’re competing with some huge companies,” said Beecher. “When the money’s gone, it’s gone. We did receive some reimbursement from this program recently and it doesn’t cost the employee anything.”
The City of Pasco is also self-insured, but healthcare costs have remained stable for the past two and a half years. The 300-plus insured (including 280 full-time employees and 38 LEOFF retirees) will experience an increase of 5 percent on July 1. The city pays 90 percent and the employee pays 10 percent of the health insurance premium, which is a “Composite Premium” for a family and not tiered.
“No one knows what the future holds,” said Lynne Jackson, Pasco’s human resources director.
Local private-sector businesses, despite their size, have followed similar trends as have been seen nationally.
In a 2011 Grant Thornton survey, 75 percent of 318 CFOs and senior comptrollers nationally named healthcare as the biggest pricing pressure in business. Twenty-one percent said healthcare costs have increased; 53 percent said costs have remained the same and 26 percent said costs have decreased for their prospective businesses.
A report updated in November by the National Conference of State Legislature listed the 2009 average annual share for family coverage as $3,354 with total premiums for a family up to $13,375. The Kaiser Family Foundation’s survey of “Employer-Sponsored Health Benefits” found overall premiums (amounts paid by employers and employees combined) rose 3 percent for family coverage and the average amount paid by workers increased an average of 13.7 percent.
Kaiser’s poll found that overall, employers expected healthcare costs to increase between 9 and 12 percent but most planned measures to cut that increase down to 6 percent. About 57 percent of employers said passing on a greater share of healthcare costs to their workers would be one cost-saving measure. Many others supported lowering costs by promoting employees’ improved health through wellness programs and incentives.
Washington state healthcare premium increases parallel those nationally. Premium distributions for private-sector employees enrolled in single coverage increased from $3,608 in 2004 to $4,923 in 2009, and family coverage jumped from $10,217 in 2004 to $12,758 in 2009.
High-deductible plans have become more popular over the past three years, with 4.5 million people opting for them in 2007 and a staggering 10 million in 2010, according to America’s Health Insurance Plans survey of members. These plans traditionally shave premiums by $85-$100 per month, but require deductibles from $1,000 to $3,000.