Hit with double-digit health insurance rate increases, employersin the region are feeling the squeeze on their bottom line whilesome employees are feeling it in their paychecks.
Despite the third consecutive year of major rate hikes, manyemployers are absorbing the premium increases. In turn, someemployees are watching their raises disappear. Others still aresimply paying more in premiums.
'The more health care costs rise, the less our wages are,' saidSue Bonnett, secretary/treasurer of the United Food and CommercialWorkers Union Local 1439. 'Not only are my wages reduced down, Ihave higher out-of-pocket costs every time I see a physician.'
The union represents about 7,000 Eastern Washington and NorthIdaho workers, including office staff, barbers, beauticians andgrocery store employees.
Nationally, the cost of health benefit plans is expected to rise10 percent to 13 percent this year, depending on the type of plan,according to Hewitt Associates, a national benefits consulting firmbased in Illinois. That's more than three times the rate ofinflation.
While some companies will absorb the majority of the rate hikes,many will pass along at least 25 percent of the increases toemployees, according to the Hewitt study. The study predicts thatmost employees will pay $125 more for their health coverage thisyear.
'We write a really big check every month to the health insuranceindustry with a lot of zeros,' said Mike Taylor, president of TaylorEngineering in Spokane, which has seen its premiums rise sharplythis year.
The company was able to absorb most of the increases, Taylorsaid. It used to pay for 60 percent of employees' premiums, but nowpays 70 percent to offset the increases.
'It's basically employee security,' Taylor said. 'They can cometo work knowing they are covered with health insurance, but itlimits somewhat what we can do with profit sharing and raises.'
The growing costs, health officials say, are driven byprescription drugs, new medical technology, increased utilization ofhealth care services, consumer demands and growing administrativecosts.
Premera Blue Cross, Washington's second-largest health insurerwith about 950,000 subscribers, expects its rate increases to be inthe midteens this year, depending on the type of the plan and theemployer group, Premera spokesman Scott Forslund said.
Regence BlueShield, Washington's largest insurer with about 1million subscribers, also is expecting double-digit increases,spokesman Chris Bruzzo said. Regence Blue-Shield of Idaho has morethan 300,000 subscribers.
Group Health, which has about 70,000 subscribers in EasternWashington and 10,000 in North Idaho, is looking at an averageincrease of 9 percent for its commercial plans, down from lastyear's hike of 11 percent.
'It's still too high anyway you look at it,' said Bill Akers,Group Health's district administrator for Eastern Washington andNorth Idaho. 'The costs are high and it's a concern.'
The employees at Altek Inc., a Spokane company that manufacturesparts for high-tech businesses, aren't the only ones noticing therising costs, said Mike Schneider, Altek's president. Customers wantto know why the company's prices aren't lower, he said.
'Our customers expect our price to go down every year, expectingthat we get better and better at what we do,' he said.
The company had to raise prices recently, in part to help offsetan 11.4 percent increase in insurance premiums.
'One of our customers has asked for documentation on our medicalinsurance increases,' he said.
Understanding the myriad reasons behind the cost increases can becomplicated. Bonnett, of Local 1439, isn't sure she believes it all.
'They have to raise their costs, but it is an inflationary ratethat is unreasonable,' she said. 'Somebody is getting rich, and itcertainly isn't the participants or the physicians.'
Bruzzo, of Regence BlueShield, said it's a common misconceptionamong consumers that health insurance companies' administrativecosts are driving the increases.
'Ten percent of average premium dollars goes to administration,and 90 percent goes to health care costs,' he said. 'We set ourrates based on experience and what health care costs.'
Health officials agree that prescription drug costs are one ofthe biggest influences on rising costs.
'Every year, they come out with better and more expensive drugs,'state Insurance Commissioner Mike Kreidler said. 'It makes it verydifficult to restrain health care inflation.'
Direct marketing of prescription drugs to consumers also appearsto be driving demand for more expensive, brand-name drugs, healthanalysts say.
Meanwhile, new technology has created better but more-expensivemedical tests and procedures.
And an aging baby boom generation means more people are usinghealth care services.
'The reality is that our average (subscriber) age is about 45years old, and every year it is going right up with the babyboomers,' said Akers, of Group Health. 'The health care costsassociated with that is exponential growth.'
Beyond the baby boomers, more people are consuming more healthservices, Forslund said.
Forslund speculates the increase may be attributed to the healthyeconomy and low unemployment, which has made health care moreaffordable and accessible for more people.
Growing costs also can be attributed to the insurance cycle, saysAaron Katz, director of the University of Washington's Health PolicyAnalysis Program.
Following the advent of managed care during the mid-1990s, healthcare plans were able to control costs, hold prices down and expandenrollment, Katz said. Managed care was successful at trimming thefat, but when health care costs began to rise in the late '90s,there wasn't anything left to cut. Health plans began reportinglarge losses.
'They sustained these losses and are now, in part, attempting torecoup those losses by increasing premiums,' Katz said.
Health plans are now focused on more profitable membership,rather than total membership.
While some health policy analysts predict health care costs willcontinue to rise at similar rates for the next several years, othersbelieve the premium increases are close to peaking. Katz said heisn't sure which way the trend will go.
As this year's rate hikes take hold, Insurance CommissionerKreidler remains concerned more Washington residents will becomeuninsured.
'It means more people are finding it harder to cover healthinsurance premiums for themselves and their families,' Kreidlersaid. 'You can expect that some people will have to make compromises- they either cut back on the amount of coverage or they gouninsured.'
