Employer-sponsored HMOs signal financial disaster
Health Benefits May Cost 12% More
By Kristen Hallam
Hartford Courant
August 16, 2005
American companies may have to pay an average of 12.6 percent more for their employees’ health insurance next year, according to a survey by Hewitt Associates, a leading benefits consultant.
Humana Inc. plans the largest increase, 23.6 percent, and nonprofit Kaiser Permanente the smallest at 10.4 percent, Hewitt found in a survey of employers. The rates are for health maintenance organizations, plans that cover 20 percent of privately insured Americans.
40 percent of employers are proposing to shift more medical costs to workers in the form of higher deductibles and a larger share of premiums, according to the Hewitt survey.
The Hewitt data suggest that employers’ health costs next year may climb at almost five times the U.S. inflation rate.
WellPoint Inc., the biggest U.S. provider of health insurance, is planning an average rate increase of 16.7 percent for employers, the Hewitt survey found.
CIGNA Corp., whose health insurance operations are based in Bloomfield, said earlier this month that about 80 percent of requests from employers are for information about plans that shift a bigger share of costs to workers. CIGNA plans to raise premiums 12.3 percent, the Hewitt survey found.
“You do double-digit increases year over year over year, and we’re now looking at costs of health care going up 80 percent in the last six years,”
said Paul Harris, senior health strategist at Hewitt.
Comment: Although this report is limited to the costs of employer-sponsored HMOs, it is particularly relevant for two reasons. HMOs are designed to provide comprehensive health care services, at least in theory, so HMO premiums reflect more closely the true costs of comprehensive health services than do PPO plans which require greater cost sharing while providing fewer benefits. The other reason that this report is especially relevant is that it reflects pricing resulting from employer/insurer negotiations and therefore represents the lowest premiums attainable for comprehensive coverage, typically about 30% lower than the individual market for comparable benefits.
Our current system of funding health care has placed America’s employers in the front seat in controlling health care cost escalation. But they’re driving us off a cliff!
It’s really not the employers’ fault. They have little control over the structural flaws that are resulting in the outrageous increases in health care costs. It will take a unified system of funding care to bring the system under control. Only then could we hope to effectively tackle problems such as those demonstrated by Wennberg (regional excesses in high-tech capacity) and Starfield (lack of an adequate primary care infrastructure that would improve quality while reducing costs). Only then would we have true monopsonistic power (single purchaser) to demand value for our health care investment (a beneficent power as long as it is our own public monopsony).
General Motors, as the largest private purchaser of health benefits, recognizes that they cannot stop a system headed toward a cliff, and that we need a “national solution.” Imagine what we could do with the nearly $2 trillion we are spending on health care if only we had a rational, national program of health insurance. Comprehensive, high quality care for everyone:
it doesn’t have to be just a dream.