The double squeeze

If the first paycheck of the new year appears smaller, it is time to check how much has been deducted for health insurance premiums.

Many changes in health plans take effect Jan. 1. As employers battle to control costs the most common response is to increase employees' deductibles and copayments. Despite those changes, most employers are still paying higher premiums, which are passed on to employees who add dependent family members to their coverage at work.

Public employers are doubly squeezed when it comes to health-care costs. While private employers can attempt to pass extra expenses on to customers through higher prices, public employers, such as the city of Cape Girardeau, must cover the extra costs with current tax revenue.

The city of Cape Girardeau took some of the most dramatic steps to control health-care costs this year locally, increasing deductibles by 150 percent for employees -- from $1,000 to $2,500 -- and by 275 percent -- from $2,000 to $7,500 -- for employees who include their spouses or children in the plan. In addition, a city worker's cost of providing family coverage rose 25 percent, from $5,995 in 2006 to $7,494 in 2007.

Those steps, however, are probably about as far as the city can push employees to pick up rising costs, said David Milam, city human resources director. The next step, he said, is to look at how to control costs by encouraging healthier choices.

"We will re-establish our health insurance committee in February to do a lot of out-of-the-box thinking," Milam said.

Cape Girardeau is a self-funded plan that pays Anthem Blue Cross a set percentage of claims for administration. The city was considering a "wellness program" for the fall but canceled the idea because of rising costs for claims. The health committee may resurrect it, Milam said.

"We fully realize that as an organization we can't keep absorbing additional double-digit inflation and can't keep changing our plan from year to year," Milam said. "We will rely on our many employees and our consultants to come up with something we can all live with."

While Cape Girardeau's increases are at the top end of the inflationary surge in health costs, almost every public employer in the region is experimenting with changes in coverage to control costs. Workers in private industry are likely to see many of the same kinds of changes, said David Johnson, a consultant with CBIZ Valuation Group LLC in Kansas City.

"If you look at a three-year period, all employers are going through it to one extent or another depending on their size," Johnson said.

Hewitt Associates, a national human resources consulting firm, is predicting that health insurance costs will increase 11.7 percent nationwide in 2007, Johnson said, a small drop from the 12.5 percent increase in 2006 but still dramatically higher than inflation in general.

While Cape Girardeau moved toward higher employee costs to contain outlays for health insurance, other area public employers took different steps.

Among the changes:

• Cape Girardeau County switched to a United Health Care plan that limits employees to using Southeast Missouri Hospital for most in-patient services. The plan increased the employee deductible to $2,000, but the county set aside $1,000 for each employee to help cover those expenses. The result was a 7.6 percent increase in total costs for the county but slightly lower premiums.
• Southeast Missouri State University tweaked its plan to keep the cost increase to about 10 percent. The changes include doubling the payment required to see a specialist, to $40, setting a $5 million lifetime payout limit for coverage and dropping a benefit that allowed health-care costs incurred in the last three months of the year to count against the following year's deductible.
• Scott County switched to American Community Mutual Insurance Co. as its provider, dropping the established coverage it had with Anthem. The deductibles and copayments remained relatively unchanged, but the county has increased deductibles in recent years to keep prices down.

By changing carriers, Scott County avoided a 21 percent increase in rates, County Clerk Rita Milam said. "Eventually, only having major medical insurance may be the key," she said. "I don't know how much longer any employer may be able to afford it if the premiums just keep going higher and higher every year."

As a consultant, Johnson said a combined program of higher costs for employees to emphasize their responsibility for the dollars spent on health care and a well-designed effort to promote healthier lifestyles are about the only ways to keep costs under control.

Up to 70 percent of health-care costs are due to illnesses that stem from lifestyle choices such as smoking, obesity or a lack of exercise, he said.

For many employers, a health savings plan of some sort is becoming the preferred method of giving employees more power to control costs. Putting a health savings plan in effect makes people more judicious in their use of services instead of thinking that doctor visits are only $20, Johnson said.

"We have lost track of how much we are paying for things," he said.

rkeller@semissourian.com

335-6611, extension 126