Health costs expected to leap

Health insurance costs are going up — the result of health reform and an aging work force — and workers in the central San Joaquin Valley will share more of the costs with employers to have coverage.

“The days of the employers picking up 100% of the costs are gone,” said Mark Karlie, vice president of employee benefits at Van Beurden Insurance, a Kingsburg-based insurance consulting firm.

When Valley workers begin this month to select health plans for the upcoming year, they’ll find insurance rates for 2011 are 9% to 13% higher than in 2010, Karlie said.

The increases continue a trend. Last year, Valley insurance brokers reported rates were up by 10% to 15%.

Nationwide, insurance premiums are expected to increase an average of 8.8% in 2011, according to an analysis of 350 large U.S. companies by Hewitt Associates, a global human resources and outsourcing company based in Lincolnshire, Ill.

The higher health insurance costs in 2011 come as employers and employees are struggling financially. Many businesses have yet to bounce back from the recession, and employees have had wage freezes and furloughs, and have gone without significant wage increases in the past two years.

To trim health costs, employers are trying a combination of strategies, health insurance experts say.

Some are choosing plans with smaller monthly premiums but higher annual deductibles, or plans that charge higher co-payments at the time of service. And some are going to plans that reward workers for belonging to wellness programs, such as stop-smoking or weight-loss classes.

A lot of money is at stake. Employers will pay $9,821 to insure an employee in 2011, according to the Hewitt analysis. And employees will pay $4,386 in premiums and out-of-pocket expenses.

Health reforms account for about 1% to 2% of the rate increases, said Sara Taylor, health and welfare solutions leader at Hewitt.

The reforms include a ban on lifetime coverage limits, free coverage for preventive care, coverage for young adults on parents’ health plans until they turn 26, and no denial of coverage for children with pre-existing health conditions.

But a big driver in increasing health-care costs is an aging work force, according to Hewitt. Employers made fewer new hires during the recession, leaving them with older workers who use more and costlier medical services.

The increased costs are “really just driven based on experience, the health of the population — how much people are using health care,” Taylor said.

Many factors

Costs will be up in 2011 for the many of same reasons rates they’ve increased in past years — higher costs for brand-name drugs, more hospitalizations, expensive use of diagnostic equipment and rising hospital prices — said Patrick Johnston, president of the California Association of Health Plans.

Many Valley employers have no choice but to shift costs to employees, said Cala Carter, president and chief executive officer of CCIS Insurance Group, an independent insurance agency in Fresno.

Offering plans with higher annual deductibles places more of the responsibility on the employee, but it’s a way employers can avoid taking more money out of workers’ paychecks each month to help pay insurance premiums, Carter said. Plans with higher deductibles typically have small monthly premiums.

“The $500 calendar-year deductible, that’s going away,” Carter said. “Even the $1,000 calendar year deductible is rare now. The $5,000 deductible is common.”

At Agri-Valley Irrigation, a Fresno-based company with six locations in the Valley and about 100 employees, health costs are going up by between 9% and 13%, depending on the health plan. The company offers workers seven health-plan choices, and one of the plans in 2011 has a $5,000 individual deductible. The employee pays a $55 monthly premium.

“In order to have decent plans, you’ve got to have a high deductible,” said Debbie Rompal, company administrator.

But employees are getting to the point where they can’t afford health insurance, she said.

“They’re going to drop it and wait and see if Obama will cover it” under health reforms that go into effect in three years, she said.

Mid-size companies, such as Agri-Valley aren’t the only ones trying to control costs by tweaking health plans.

At Community Medical Centers, about 5,200 employees at Community Regional Medical Center in downtown Fresno and Clovis Community Medical Center choose a plan either provided by the hospital or an outside health maintenance organization plan through Blue Cross of California.

The Blue Cross premiums will increase about 5% in 2011, said Ginny Burdick, Community’s senior vice president of human resources. The Community-based plan will have no premium increases, she said. But employees will notice changes.

“We’re doing a little bit of cost-shifting,” Burdick said. For example, a $200 annual deductible will increase to $350, and an emergency room visit that now costs $200 will have a $400 co-pay.

If it’s a true emergency and the worker is admitted to the hospital, the co-pay is waived, Burdick said.

The hospital also will offer a high-deductible plan for the first time in 2011. Individuals would have a $1,500 annual deductible — but pay nothing toward a monthly premium, Burdick said.

Controlling costs

Community tries to control insurance rates in other ways by offering free preventive care, such as mammograms and colonoscopies, Burdick said.

And last year, the hospital added a wellness plan.

A nurse is available for patients with high blood pressure, high cholesterol, diabetes and high-risk pregnancies to help manage their health care, she said.

Wellness plans are popular with employers, said Taylor of Hewitt Associates. Other cost-saving methods tried by employers, including consolidating health plans, have brought down costs as much as they can.

“The only thing left they can do is get people healthier,” Taylor said. “Healthier people cost less.”

A wellness program has paid off for Kings County and its workers.

The county started a program in 2008 to encourage employees to stay healthy. A year after it started, insurance rates remained flat.

And costs have dropped 9% in 2010, said Allison Picard, human resources director.

Either the wellness program has made the difference or the county has just been “very lucky in terms of folks’ health,” she said.

By Barbara Anderson / The Fresno Bee