by Dave Gardner
As commerce marches into 2019, despite a host of political promises, no employer relief appears in sight from frustrating health insurance costs as high policy premiums are joined again by annual price increases.
According to the Kaiser Family Foundation, on a national level, employers and workers together spent almost $20,000 for family health insurance coverage during 2018. These companies paid an average of $14,100, with employees contributing an average of $5,550, totaling a 65 percent increase over 10 years.
Dan Day, senior vice president and chief marketing officer with Highmark Blue Cross Blue Shield, commented that insurance policies purchased through the ACA marketplace have finally stabilized as insurer spending now can include accurate actuarial data of claims compiled over several years. This allows a true understanding of insurer outlays, thereby creating price stability.
Within the small group market, on average, 2019 will feature policy cost increases of approximately a six percent increase. This will predictably vary by situation, claims and other factors such as demographics.
Day explained that the three cost drivers functioning within the health insurance system remain alive and well. These are high patient insurance use, drug costs and prices for steadily advancing scientific technology.
“We spend a lot of energy trying to slow these down, but overall costs continue to rise,” said Day.
On the caregiver front, big news that will play out during 2019 includes the effects of the expansion, acquisition and assimilation of various health systems. This process now has largely been completed, forcing insurers to adapt.
“Care systems may change alignment with a health plan around contractual realities,” said Day. “Many of these large system assets are now aligned.”
In the case of Pennsylvania, a widespread unhealthy and obese population with an epidemic of diabetes continues to jack up insurer payments to providers. According to Day, the majority of coronary disease now being treated is avoidable because it is directly related to behavior such as lack of activity, smoking and weight gain, with only 20 percent of associated disease genetic in nature.
“Cancer is caused 50 percent by behavior, making it largely avoidable,” said Day. “Therefore, the real challenge within Pennsylvania is to modify patient behavior, and this isn’t easy although we have had some success with employer wellness plans coupled with strict safety programs.”
Looking ahead into 2019, insurer spending for patient drugs presents another challenge. According to Day, pharma costs now make up 15 to 20 percent of total insurer outlays, with 95 percent of this spending flat for routine illness.
The ongoing advancements of pharma science are another matter as new drugs come to market.
“Specialty drugs that have six-figure price tags are used relatively sparingly, but they are the ones blowing up total costs for pharma,” said Day.
“There’s talk that within a few years there will be 50 percent increase in total spending for pharma, largely because of these high-priced drugs.”
New treatments and therapies, largely considered impossible in the past, also are driving up insurance rates. These include promising ways to use the human immune system to fight cancer, even though when they arrive on the market the treatments are very expensive.
Uncompensated care also must be considered when evaluating costs for insurance.
“When people don’t have insurance coverage, many will go to the ER for treatment and then not pay,” said Day. “This can later show up in the hospital balance sheet creating higher prices for the insured.”
From the employer perspective, 2019 will include minimal policy pricing increases compared to some years, according to Michelle Grushinski, past president of the NEPA Chapter with the Society of Human Resources Management. In her specific situation, she said this is the result of her organization achieving a good year with insurance claims.
The modest policy price increases, however, are being inflicted in an environment where compensation costs are on the rise due to an outbreak of wage competition, which had been relatively flat for many years.
“For so long an employee merit increase was just a cost of living increase,” said Grushinski. “Now, as we move into 2019, compensation costs are great unknowns.”
Grushinski is firm that, despite a great deal of bluster, Washington is delivering only mirrors and deception with health insurance cost reduction. Some of the mandated benefits of insurance targeted by Washington through the Accountable Care Act did raise costs in the short run, but also were potent weapons to reduce insurance claims over the long haul.
“Yes, the tax penalty for employers will now be dismantled, but when you look comprehensively it’s obvious we’re experiencing only a guerrilla war with changes,” said Grushinski. “There is nothing coming out of Washington to address the long-term cost problems, and now we’ve got a lot of confusion over system changes in fines from the IRS.”
She added that an honest examination of long-term trends within the employer insurance market reveal a system headed for a shipwreck.
“The employer system with these annual five percent to seven percent increases just cannot continue, and there’s no simple answer to fixing it,” said Grushinski.
Add in celebration
Kurt Wrobel, chief financial officer and chief actuary with the Geisinger Health Plan, confirmed that his employer small groups will also largely endure a modest rate increase for 2019. This will be in the low single digits, with differing market dynamics for various employers.
He agrees with Day about the three big cost drivers continuing to escalate policy costs and that every health plan is struggling with the same realities. In the case new treatments that save lives, such as using the immune system to fight cancer, Day argues that celebration should also be heard because of the reduction in human suffering.
“Employee wellness programs are one tactic that can help with costs, but changing human behavior is difficult,” said Wrobel. “Data is also indicating that wellness programs must be comprehensive with education. You can just give somebody movie tickets for what they have accomplished with wellness and stop there.”