Expect more premium increases and greater out-of-pocket expenses beginning October 1^st as insurers begin to roll out their plans to employers for January 1.

Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections.

Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.

These and other insurers say Congress’s landmark refashioning of U.S. health coverage, which passed in March after a brutal fight, is causing them to pass on more costs to consumers than Democrats predicted.

Insurers say the law mandates free preventive care that raises premiums.

The rate increases largely apply to policies for individuals and small businesses and don’t include people covered by a big employer or Medicare.

About 9% of Americans buy coverage through the individual market, according to the Census Bureau, and roughly one-fifth of people who get coverage through their employer work at companies with 50 or fewer employees, according to the Kaiser Family Foundation. People in both groups are likely to feel the effects of the proposed increases, even as they see new benefits under the law, such as the elimination of lifetime and certain annual coverage caps.

Many carriers also are seeking additional rate increases that they say they need to cover rising medical costs. As a result, some consumers could face total premium increases of more than 20%.

While the increases apply mostly to the new policies insurers write after Oct. 1, consumers could be subject to the higher rates if they modify their existing plans and cause them to lose grandfathered status.

The rate increases are a dose of troubling news for Democrats just weeks before an election in which they are at risk of losing their majority in the House and possibly the Senate.

In an interview with WSJ’s Alan Murray, Aetna Chairman and CEO Ronald Williams says that a side effect of the health-care reform bill is that costs will increase. He also criticizes leaders in Washington for the demagoguery of his industry that persisted during the health-care debate.

In addition to pledging that the law would restrain increases in Americans’ insurance premiums, Democrats front-loaded the legislation with early provisions they hoped would boost public support. Those include letting children stay on their parents’ insurance policies until age 26, eliminating co-payments for preventive care and barring insurers from denying policies to children with pre-existing conditions, plus the elimination of the coverage caps.

Weeks before the election, insurance companies began telling state regulators it is those very provisions that are forcing them to increase their rates.

Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.

Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1% premium rise for a small-employer health plan. It asked regulators last month to approve the increase.

In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.

The White House says insurers are using the law as an excuse to raise rates and predicts that state regulators will block some of the large increases.

“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said.

Previously the administration had calculated that the batch of changes taking effect this fall would raise premiums no more than 1% to 2%, on average.

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Looks like healthcare costs continue to rise. Is there any help for employees and consumers who are getting stuck with larger out-of-pocket expenses?

The Star Ledger – on line

Strained by rising health care costs and the sour economy, U.S. employers are pressing workers to shoulder the added burden alone as employees pay higher insurance premiums and more out-of-pocket expenses for their medical care.

The average employer-provided family health plan now costs workers nearly $4,000 a year, up 14 percent from last year, according to a survey by the nonprofit Kaiser Family Foundation and the Health Research and Educational Trust.

That is the largest annual increase since the survey began in 1999 and a marked change from previous years, when employers generally split the cost of rising premiums with their employees.

Indeed, the average employer contribution to a family plan did not increase at all this year, meaning the entire increase was borne by workers.

Overall, premium growth slowed slightly this year to 3 percent, with the average annual cost of a family health plan reaching $13,370. Workers picked up 30 percent of that bill.

The average plan for a single individual cost $5,049.

At the same time, workers also saw average co-payments for routine office visits rise 10 percent and deductibles continue their surge upward.

In 2010, more than a quarter of American workers with employer-provided health coverage are in plans with deductibles of $1,000 or higher.

“It’s really bad news for everybody,” said Helen Darling, president of the National Business Group on Health, an organization of large employers that provide coverage to about 50 million workers, retirees and dependents.

The squeeze, reported by employers between January and May, largely reflects the fallout of the ongoing economic slowdown and may be ameliorated in future years as the new health care law is implemented.

But it could also further complicate the Obama administration’s efforts to rally support for the law, which is expected to do relatively little in the short term to contain rising medical bills.

“There have been times when employers been able to absorb costs. This is not one of those times,” said James Gelfand, health policy director at the U.S. Chamber of Commerce, a leading critic of the new law.

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It’s a fact, health care costs continue to increase.  Insurers are raising premiums while offering less comprehensive coverage. To complicate matters, many employers are putting price before quality when searching for a health plan.

By Lydell C. Bridgeford

American workers continue to see their health care costs increase, while receiving less comprehensive coverage. To complicate matters, employers are doing a lackluster job of shopping for quality health plans.

According to research by the Kaiser Family Foundation and the Health Research and Educational Trust, U.S. workers are paying, on average, about $4,000 for family health care coverage, a 14% or $482 jump from 2009 costs.

The spike occurred despite the total premiums for family coverage, which includes employer contributions, only increasing by 3% to $13,770 this year, researchers found.

Employer contributions for family coverage, however, remained steady, meaning companies are shifting more of the health care costs onto workers.

In the survey report, “2010 Employer Health Benefits Survey,” analysts also indicate that companies are raising the annual deductibles employees must pay before their health plans start to pick up the costs.

For example, a total of 27% of covered workers face annual deductibles of at least $1,000, up from 22% in 2009, according to the survey results. Among small employers with 3 to 199 workers the number rose to 46% for such deductibles.

Researchers conducted the survey between January and May of 2010. It included 3,143 randomly selected non-federal public and private employers with three or more workers. Of which 2,046 responded to the full survey and 1,097 responded to a single question about offering coverage.

“Much of the survey collection was done before the health reform law passed and most of the benefits arrangements described in the report occurred before there were any reasons to know what the health reform law would actually say,” explains Gary Claxton, vice president and director of the foundation’s health care marketplace project and the study leader author.

Still, since 2005, workers’ contributions to premiums have rose 47%, while overall premiums increased 27%, wages jumped 18%, and inflation spiked 12%.

“With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles and other cost-sharing,” says Dr. Drew Altman, president and CEO at the Kaiser Family Foundation.

“This may be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive. From a consumer perspective, the cost of health insurance just keeps going up faster than wages,” he adds.

In addition, 30% of employers admitted they reduced the scope of health benefits or increased cost sharing because of the economy.

Health plan quality

Meanwhile, the report reveals employers are not considering quality in their decision-making process on health plans.

Overall, large employers with 200 or more workers were more likely (34%) to review performance indicators on health plans than small employers with 3 to 199 workers (5%). The most common indicators used were the Consumer Assessment of Health Care Providers and System (77%) and hospital outcomes data (61%), according to the survey results.

About 75% of employers indicated that they were “somewhat satisfied” or “very satisfied” with the information available on health plan quality. However, only about 50% of firms claimed that the information was “somewhat influential” or “very influential” in their decision to select health plans.

Moreover, only six percent of employers said they review information on health plan performance, and the ones who did look at information on plan quality only half said it was influential to the their selection of a health plan, says Megan McHugh, research director at the Health Research and Educational Trust.

“With quality improvement efforts expanding and with increased focus on transparency, employers do have the ability to find data on quality of care and use it when they are comparing health plans,” says McHugh. “The lack of comparison shopping based on quality … is troubling. We are finding employers don’t hold health plans accountable for the care they offer,” she adds.

McHugh speculates that employers are choosing health plans based on price and quality might not rise to the same level of importance.

In addition, perhaps, employers are “weary of the value of quality indicators and don’t understand the indicators that are available to them. They also might believe that the quality monitors can be entrusted to others, such as the health plan and the accreditation organizations,” she explains.

Other key findings from the survey include:

• Consumer-driven plans have established a foothold in the employer market, tripling their market share from 4% in 2006 to 13% in 2010.

• Preferred provider organizations (PPOs) continue to dominate the employer market, enrolling 58% of covered workers. Average PPO family premiums topped $14,000 annually in 2010.

• Single-payer coverage increased 5% in 2010 to reach $5,049 annually. Workers on average are paying $899 annually for single coverage, up from $779 in 2009. Forty-seven percent of covered workers are in single coverage plans.

• Physician office visits: Among covered workers with a co-payment for in-network physician office visits, the average co-payment increased a small but statistically significant amount from 2009 to 2010 – from $20 to $22 for primary care and from $28 to $31 for specialty care.

• Mental health benefits: In response to the 2008 Mental Health Parity and Addiction Equity Act, 31% of firms with more than 50 workers made changes to the mental health benefits they offer. Most of this group eliminated limits on coverage to comply with the law, though a small share (5% of those making changes) dropped mental health coverage altogether.

• Wellness benefits: About three-fourths (74%) of employers offering health benefits offer at least one of the following wellness programs: weight loss program, gym membership discounts or on-site exercise facilities, smoking cessation program, personal health coaching, classes in nutrition or healthy living, web-based resources for healthy living, or a wellness newsletter.

Health risk assessments: Among firms offering coverage, 11% give their employees the option of completing a health risk assessment to help employees identify potential health risks. Within this group, 22% —or a relatively small two percent of all employers—offer financial incentives such as lowering the worker’s share of premiums or offering merchandise, gift cards, travel, or cash to their workers. Large firms are more likely than small firms both to offer assessments and to offer financial incentives.

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There may be hope for consumer directed high deductible plans afterall. Read the following article to learn more.

By Charlotte Huff, Workforce Week Magazine

High-deductible plans, with or without an attached savings account, may provide the best flexibility to meet the coverage limits—both minimum and maximum—inherent in the health reform legislation.

Before health care reform, benefits consultants worried that the insurance overhaul would sideline consumer-directed plans or perhaps jettison them altogether. Their latest sentiment: modest to substantial optimism.

As with any post-reform plan, large employers should carefully structure their consumer-directed options, typically a high-deductible policy paired with another account, such as a health savings account. Ideally, coverage would adhere to a middle ground, meeting the reform legislation’s minimum coverage requirements without becoming sufficiently generous to trigger the so-called “Cadillac,” or excise, tax, beginning in 2018.

But the myriad ways in which these high-deductible plans can be structured likely leave them well situated in the post-reform world, benefits consultants say. Along with the plans’ flexible design, they also cite other reform-related changes as being influential, such as the new limitations on another type of account, the flexible spending account.

“Frankly, these consumer-directed plans are pretty well-positioned,” says Michael Thompson, a principal in the health and welfare practice at PricewaterhouseCoopers. “I think what we’ll find is not a slowing of the process, but actually an acceleration of the process to consumer-directed and high-deductible plans in general.”

Before President Barack Obama signed health reform into law in March, consumer-directed plans were already gaining some traction among large employers, according to an annual survey conducted by the National Business Group on Health and Towers Watson. By 2011, 61 percent of employers intend to offer a consumer-directed plan; the option was provided by only 33 percent in 2006. Meanwhile, nearly half (46 percent) of those who offered a consumer-directed plan in 2010 reported enrollment of at least 20 percent.

As more employees signed up, the cost per employee declined, according to the same survey, which involved 507 employers each with at least 1,000 employees. Annual health costs per employee totaled $6,848 when at least half of the employer’s workforce enrolled in a consumer-directed plan, compared with $7,743 per employee when enrollment fell below 20 percent.

Employers are paying closer attention than ever before to those types of bottom-line statistics, says Alexander Domaszewicz, national health consumerism lead for Mercer. “None of the cost issues and very few of the quality and delivery issues have been meaningfully addressed in the reform legislation,” he says.

Cost pressures
As employers look ahead, one worry is the excise tax. Effective in 2018, a 40 percent tax will be applied to any of a health plan’s total value that exceeds the premium threshold—$10,200 for individual coverage or $27,500 for family coverage.

But Jay Savan, a senior consultant at Towers Watson, says other economic constraints just a few years off will be more influential than the excise tax in encouraging employers to consider a high-deductible plan.

Beginning in 2014, once the health insurance exchanges are established, employers will have an incentive to keep employees’ premium contributions below 9.5 percent of their adjusted gross income if workers earn less than 400 percent of the federal poverty level, Savan says. Otherwise, the employer will have to pay a penalty—typically $3,000 annually per such employee who receives coverage through a health exchange—for surpassing that premium ceiling.

That’s a relatively low bar, Savan says. For a family of four, 400 percent of the federal poverty level is $88,200 annually. If that penalty were in effect today, that employee couldn’t pay more than nearly $8,400 annually toward health coverage.

“The plans that are most likely to allow the employer to stay under that [premium] threshold are going to be high-deductible health plans,” Savan says. “Whether they are HSA-compatible or not, it’s going to be those plans, by virtue of simple mathematics.”

The average annually family health premium, as of 2009, reached nearly $13,400, according to an annual survey by the Kaiser Family Foundation and the Health Research & Educational Trust. But the employee’s contribution averaged just $3,515.

For companies with lower-income employees, though, a relatively low premium can still exceed 9.5 percent of adjusted gross income, Savan says. Add in rising health costs and that likelihood increases, he says.

Establishing guardrails
In a sense, the new health reform law contains inherent guardrails that employers should pay attention to, Domaszewicz says. On the lower end, they should make sure that coverage isn’t classified as inadequate—defined as covering less than 60 percent of allowable costs. But as their plans’ total value increases, employers also need to stay sharp, he says.

“They can’t design them [the plans] too rich because they will eventually hit this excise tax,” he says. “They can’t design them too poor or too skinny because they are not going to meet this 60 percent requirement in terms of actuarial value.”

The reform law’s move to cap FSA contributions at $2,500 annually, beginning in 2013, also may spur employees themselves to take a second look at health spending accounts, says Chantel Sheaks, a principal in Buck Consultants’ National Technical Resources Group. A parent who is facing a large bill for braces, for example, may decide to bypass the FSA and instead contribute a higher amount to an HSA-linked insurance plan, she says.

Another reform-related wrinkle, Thompson adds, is that contributions to savings accounts, including an FSA or HSA, will be counted toward the plan’s total value in determining whether it qualifies for the excise tax. “It’s only a matter of time before FSAs become less common with employers,” he says.

In the years ahead, employers may adopt other measures, such as limiting company or employee contributions to HSAs, to prevent hitting the excise tax threshold, Savan says. But the Towers Watson consultant, a longtime proponent of consumer-directed plans, remains bullish that their time has finally arrived.

By 2013, nearly all large employers will be offering the insurance option, Savan predicts. And more employees will buy in, doubling the current median enrollment of 15 percent to 30 percent or more, he says.

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Looks like medical costs are expected to trend well above inflation for 2011. In addition, consumer out-of-pocket costs have increased as employers continue to shift the cost onto employees.

Medical costs are expected to increase by 9 percent in 2011, according to a report from PricewaterhouseCoopers LLP. Although the increase is down 0.05 percent from the 2010 growth rate, it still is expected to outpace the rate of inflation. For the first time, the majority of the American workforce is expected to have a health insurance deductible of at least $400 as more employers return to indemnity-style cost sharing by raising out-of-pocket limits, replacing co-payments with co-insurance and adding high-deductible health plans.

Hospital and physician costs, which make up 81 percent of premium costs, are the biggest inflators of the 2011 medical cost trend. Hospitals shifting costs from Medicare to private payers and employers is seen as the top reason for higher medical cost trends. In 2011, Medicare will reduce payment rates to hospitals for the first time after seven years of increases that almost matched or exceeded inflation increases. Some hospitals that benefitted from higher payments in 2008 and 2009 may be able to manage this type of cut by tapping their reserves, but many hospitals are likely to shift more costs to commercial payers during their negotiations, according to the report.

In addition, increasing consolidation among physician practices is expected to increase their bargaining power. Payers expect to see more negotiating power and higher prices in the short term, but efficiencies created by consolidation will moderate future rate hikes.

The report findings are based on a survey of more than 700 employers from 30 industries and interviews with health plan actuaries.

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