Experts mull how to slow spiraling health-care costs

The Affordable Care Act was intended to stem the tide of rising health-insurance costs, but premiums have continued to increase at alarming rates, posing challenges for businesses and consumers. BizWest spoke with Adela Flores-Brennan, executive director of the Colorado Consumer Health Initiative, and Clair Volk, owner of Longmont-based VolkBell, about what’s causing the spikes.

Why do health-insurance premiums continue to rise?

• Adela Flores-Brennan: While we have made significant progress in getting people in Colorado covered through either Medicaid or private health insurance, health insurance premiums do, in fact, continue to increase. After Year One of health reform, the increase was very small, on average. This past year, depending on the health-insurance company and the area of the state, some increases were sizable. This past year was the first year post health reform that the insurance companies had the benefit of data based on their customers’ insurance claims. For some carriers, those claims were very significant because they had a lot of sick customers or because their customer base represented a lot of pent-up demand (people who had previously been uninsured and putting off care). These factors explain insurance increases in the very recent past, and while we can expect those factors to moderate in the coming years, they will not necessarily completely prevent insurance rate increases. There are still many things about the health-care system that we need to address that ultimately impact consumer pocketbooks. For example, the way we pay for health care is on a fee-for-service basis that incentivizes the delivery of more care or services. There is a great deal of consolidation happening in the delivery system that increases negotiating power and can keep rates higher. The costs of prescription drugs are increasing.

At the end of the day, there are still protections in place to help mitigate the impact of rate increases for customers:

The Division of Insurance scrutinizes all proposed rate increases before they are able to go into effect. The division can and does reduce proposed insurance rate increases. This process has saved Colorado consumers tens of millions of dollars.

The so-called 80/20 rules requires 80 cents of every health-care dollar to be spent on health care, thus reducing the amount of money that can be spent on administration. This rule has resulted in rebates to Coloradans.

• Clair Volk: Health insurance premiums continue to rise because the Affordable Care Act has not addressed the biggest problem in the health-care industry: the cost of care. The Affordable Care Act addressed the accessibility gap in the health-insurance industry, but until employers start focusing on the cost of the care its employees are receiving, premiums (and claims) will continue to rise.

Is the single-payer health-insurance system that Coloradans will vote on in 2016 fair to individuals when everyone will be taxed 10 percent of their wages to pay for it?

• Adela Flores-Brennan: Our understanding is that the single-payer health insurance proposal will be available to just about everyone in Colorado, and that is the reason for the tax. Some individuals will pay less than 10 percent because it will be administered as a payroll tax and the burden will be divided between the employer and employee.

• Clair Volk: First of all, this tax increase will be enormous, initially estimated at $25 billion. As we have learned from other government programs this tax increase very likely will not be sufficient and will go up significantly to support the program. The biggest concern with the tax increase will be the impact to the employer community, which is the engine to the Colorado economy. How many will go out of business, reduce their number of employees or leave the state for a more friendly tax environment?

The state of Vermont proposed a single-payer model back in 2010. In addition to an 11.5 percent payroll tax, they also needed to increase income taxes. Even with all that, they could not project operating out of the red; thus, they scrapped the idea. As Gov. Peter Shumlin, who promised to implement this model if elected, noted from Vermont, “The potential economic disruption and risk would be too great for small business, working families and the state’s economy.”

Currently we have a choice of carriers (although not many, but better than just one) and we can choose a plan design that meets our individual needs. Neither of these are available with a single-payer model. We only have to go to Canada or the United Kingdom to get a glimpse of a single-payer model.  They are great if you are healthy, but not so good if you actually need care.

What are the two first steps that need to be taken to lower health-insurance premiums?

• Adela Flores-Brennan: There is no silver bullet on lowering health-insurance premiums. One first step is increasing price transparency across the system so that we know what we are dealing with. The other is finding a way to pay for value (rather than fee for service) across all payers.

• Clair Volk: I will give you three steps. Employers can curb, and even lower, the cost of health insurance premiums by implementing programs to keep the healthy population well, ensuring those that do need care are receiving the appropriate treatments and proper diagnosis, and giving plan members access to the highest quality care at the best possible price.

Will building new hospitals in areas where existing hospitals don’t run at full capacity increase or decrease cost of services for patients?

• Adela Flores-Brennan: Creating more supply without a demand seems counterintuitive and expensive and might incentivize higher charges to pay for the construction or unoccupied beds.

• Clair Volk: I see no scenario where another hospital in Boulder County will do anything but increase the cost. The cost to build a new facility will have to be paid by someone, those of us that pay insurance premiums and/or those of us that pay taxes to fund Medicare and Medicaid. Our problem with health care today is we use more than we need, and when you get to the hospital the costs are hard to control. Most hospital systems are trying to figure out ways to engage with their community to improve the health of the population with the goal of reducing unnecessary hospitalizations. I’m not sure how adding new beds in a community helps achieve that goal.

Do you agree or disagree that there is unnecessary care being forced on unwitting patients, and tell us why?

• Adela Flores-Brennan: I think there is an imbalance in information and knowledge between patients and providers, and the current system does not support full engagement of patients in a way that helps them understand all of their options or risks and which treatments have the highest degree of success or are the most cost effective.

• Clair Volk: In many cases, there is too much unnecessary care being delivered. One reason is the way doctors and hospitals are paid. Currently most are paid a fee for service, which means the more procedures you do, or the more days in the hospital, the more they get paid.  The United States provides more CT Scans, MRIs, bypass surgeries, etc., than any other country, yet we find ourselves in the middle of the pack when it comes to life expectancy. Some of the new payment models from the government and insurance carriers are changing this to incentivize the providers to reduce this unnecessary care.

Another reason for this is that for too long. those of us with regular insurance had little if any incentive to question the cost or need for the procedure being recommended. As long as someone else is paying the bill, why would I care what the total cost was?

This is changing, however, with the advent of higher-deductible plans, which has given the consumer the incentive to now shop for best price and outcomes. It has also forced providers to now be more transparent with their costs and quality.

Doug Storum compiled this report.

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