Smaller employers face hike in health premiums

Leading economic indicators

Smaller employers face hike in health premiums

Helen Taylor

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Health care is an industry more susceptible to economic shifts than some, because managed care, the driving force affecting every aspect of the industry, is still a relatively young and rapidly changing phenomenon.Jim Hertel, publisher of the Colorado Managed Care Newsletter and the Directory of Colorado Managed Care, suggests that one of the most notable changes in store for the health-care industry in 1998 will be premium hikes.
"We˜ve just completed an era of relatively stable premiums, which is about to change radically," Hertel said. "I anticipate significantly higher premiums for smaller employers due to the impact of the small-business health-care reform law, which now includes groups as small as one."
Dr. Michael Paddack, regional medical director for PacifiCare of Colorado, agrees that rates will go up, and smaller employers will be hardest hit, but employers won˜t see substantial increases until 1999 because most rates have already been set for the coming year, he said.
Paddack said insurance companies will be forced to raise rates because health-care costs continue to rise and the companies continue to lose money.
"Employers should prepare themselves for big increases of 5 percent or more coming in 1999," Paddock said.
He said that PacifiCare hasn˜t raised its rates in five years but has no choice but to do so now, especially in Northern Colorado where health care is more expensive.
"We˜ve decided to charge what it costs to provide care in each part of the state rather than subsidize more-expensive regions like Northern Colorado with revenue from other areas," he said. "It˜s no secret that Northern Colorado killed us last year, and I don˜t see the HMOs making much money next year. We have to raise rates because the stockholders demand it."
PacifiCare is not alone. Health plans in general are going through a painful period as costs are moving upward, said Dr. Donald Wells, executive and medical director of United Physicians of Northern Colorado and clinic administrator of Associates in Family Medicine P.C. The result will be higher premiums and more pressure on providers to keep costs down.
With regard to providers, Hertel believes that they will see continued expansion of national and regional companies looking to acquire or develop formal affiliations with smaller Northern Colorado-based providers, including ancillary health-care services such as home-care agencies.
Doctors will have to work a little harder to maintain their bottom line and be amenable to partnerships as mergers, acquisitions and groupings continue to be a trend.
Also, doctors can expect to take on some of the responsibilities of HMOs, Wells said. Quality assurance, utilization review, claims, and accreditation issues will increasingly fall to physicians, while insurance companies will focus on sales and service.
"There is a movement afoot by some of the more-innovative HMOs to delegate these decisions to physicians, and with that will come better quality and service," Wells said.
For the consumers, Hertel suggests that higher premiums will increase consumer focus on how health plans are designed.
"It will be interesting to see if consumers are willing to pay more for broadened provider access or opt for lower rates in exchange for reduced access," he said.