Growth of health care premiums costs may be slowing

By Michelle E Shaw, The Virginian-Pilot

Health care premium costs continue to rise, but the growth of those costs is slowing down, experts and analysts say.

That would be a surprise for some small business owners like Lynn Nelson of Integrity Transportation Services in Virginia Beach. For her, there doesn’t seem to be any relief in sight.

Nelson pays the entire insurance premium for her four female employees, and for the past two years she’s paid 20 percent more each renewal period. The cost now starts at about $2,500 per employee and goes up.

“I do it because it is important to me to take care of my employees,” said Nelson of the trucking company’s office workers. “This is a way I can show them I really care.”

Throughout Hampton Roads, employers are entering into a period which is traditionally called open enrollment. Typically for October through December, this is a period when eligible employees may enroll in, transfer or change health care coverage programs.

Taking on additional health care costs is something many employers do, but the question is how long can they afford to do it, said Richard Keatley, Norfolk practice leader of the New York-based Mercer Health & Benefits, a consulting unit of Mercer Human Resource Consulting.

“Employers are wrestling with how to continue to provide benefits to the employees at rates of cost that don’t threaten their financial future,” he said.

Numerous studies have tracked the increase of health care costs over the past decade. Studies generally agree: Premium growth has surpassed the rate of inflation and employee earnings.

Health care spending per privately insured person in 2005 increased 7.4 percent, according to a study by lead author Paul B. Ginsburg, president of the Washington-based research organization Center for Studying Health System Change.

An annual survey sponsored by the Kaiser Family Foundation and the Health Research & Educational Trust reported that the premiums of respondents increased 7.7 percent from spring 2005 to spring 2006. The survey consisted of more than 2,100 private and public employers.

In 2006, the average health care rate increases were 7.9 percent, according to Hewitt Associates, a global human resources company, based on a cost and performance analysis of more than 1,800 U.S. health plans. For 2007, the company is projecting a similar increase – 7.7 percent.

Hewitt predicts that for major companies, the average health cost per person will increase from $7,744 in 2006 to $8,340 next year. It also says employees will contribute 20 percent of the overall health care premium, or $1,678 in 2007, up from $1,576 in 2006.

Optima Health, a Virginia Beach-based insurer and part of Sentara Healthcare, expects its customers will see increases “consistent with the national averages,” said spokeswoman Kimberly Van Sickel.

These projected numbers might not tell the whole story for Virginia, said Kenn Penn, chief operating officer of ChamberSolutions, a Norfolk-based group owned by 14 chambers of commerce in the state that provides member benefit programs.

“The pie is a bit different here,” Penn said. “Premiums increased around 10.5 percent last year and are expected to be about the same this year.”

Penn said one reason the numbers might be different here is because most companies that issue plans for small businesses in particular have age bands.

“That means a 25-year-old doesn’t pay the same thing as a 50-year-old,” he said. “As the population and the work force ages, premiums go up just because of that natural occurrence, and there could be significant increase there.”

Employers across the country, as well as here in Virginia, are working hard to keep health care costs down, for them and their employees, experts say.

“I think this is the year of the consumer-driven health plan,” said Toni Allen, Anthem Blue Cross Blue Shield director of product development for the Virginia group segment. “I’m talking about plans that are designed to encourage greater involvement on the consumer level.”

She said health savings accounts and other account-based programs are a component of consumer-driven plans and are gaining popularity.

“The idea is that those dollars in an account, and the idea of those dollars being spent like that of your checking account, will better engage the consumer and help them understand how much their services cost,” Allen said.

Employers also are focusing more on helping employees stay healthy, she said.

“The thing that is really interesting in the health and wellness world is that there’s a lot more employers can do, like setting up a walking trail, promoting good health by changing the types of snacks offered in vending machines, on-site screenings and things like that,” she said. “And employers are open to the idea.”

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