HMO rates climb again for 2002
Increases tied to drug costs, fees for care
By Liz Kowalczyk, Globe Staff, 6/21/2001
ompanies and their employees can expect significant increases in their health insurance premiums for the fourth consecutive year in 2002, as prescription drug costs climb even higher, patients demand ultrafast imaging tests, and hospitals and doctors win bigger fees.
Even though new rates don't take effect until January, large employers are receiving 2002 premium estimates from health plans this month. Executives at Massachusetts' three largest insurers - Harvard Pilgrim Health Care, Tufts Health Plan, and Blue Cross and Blue Shield of Massachusetts - said they will raise premiums an average of 8 to 15 percent. Nationally the increases may be even higher, benefits consultants said.
Employers are just beginning to grapple with the bad news, but many companies plan to pass along the extra costs to their workers in the form of higher deductibles for hospital stays and copayments for office visits and medications, consultants said. But executives at other firms said they raised fees for employees last year and are worried that further increases this soon will annoy and anger their workers.
''We're struggling with this,'' said Kathy Reinhardt, director of benefits for Analog Devices in Norwood, which has 3,000 employees in Massachusetts. ''The company needs to make decisions about how much of the cost it can absorb. But we're also asking employees to take on a lot of extra work, and higher health insurance costs would be just one more thing they have to deal with. We're all asking: `Where do we go from here?'''
At the 25-person accounting firm of Rucci, Bardaro and Barrett in Malden, president Bill Rucci said that he may have to ask employees to pay for a greater portion of the premiums. The cost for an individual policy with Tufts is $191 for individuals, $523 for families. The firm pays 100 percent of the cost of individual policies and puts that same amount toward family coverage.
Tufts already warned Rucci that premiums for his company will jump 20 percent next year. Another option is to switch to a new insurer, but he already switched to Tufts this year when the company's former insurance company, Cigna, threatened to raise his premiums 65 percent.
''Employers are frustrated with the magnitude of the cost,'' acknowledged Kevin Counihan, Tufts senior vice president of sales and marketing. ''They remember the mid-1990s, when a 1 percent increase prompted immediate appeals. They remember the good old days. We were lulled into thinking we had a new model that would keep working.''
That model was managed health care, '90s-style. And during most of the 1990s it did what it promised. It stopped the double-digit health-care inflation of the late 1980s by limiting expensive and sometimes unnecessary procedures and tests for patients, reducing hospital stays, and holding down fees to hospitals and doctors.
But patients and providers rebelled. Patients want access to the latest technology and top hospitals. And providers said they can no longer accept fees that are below the cost of providing care. Partners HealthCare, the hospital and doctors network that includes Massachusetts General Hospital and Brigham & Women's Hospital, has won steep fee increases from the state's three largest insurers, including 25 percent to 30 percent over four years from Harvard Pilgrim.
At the same time, drug companies began marketing an array of expensive new drugs for conditions ranging from depression to high cholesterol, which patients are demanding.
As a result, Harvard Pilgrim said the premiums it charges employers will grow by 10 percent to 15 percent next year, a bit higher than this year. Tufts is estimating an 8 percent to 10 percent increase, and Blue Cross an 8 percent to 14 percent jump - both slightly less than this year.
Steve Booma, executive vice president of sales, marketing, and service for Blue Cross, said a three-tier pharmacy plan that goes into effect in July will slow the company's expenditures for prescription drugs. Under the plan, members pay $5 or $10 for generic drugs, $10 to $20 for preferred brand-name drugs, and $25 to $35 for nonpreferred brand names. The higher copayments are intended to encourage consumers to ask their doctors and pharmacists for the cheapest drugs.
Tufts and Harvard Pilgrim executives said their three-tiered pharmacy programs already are having an impact on costs. But executives at all of the plans said the higher fees demanded by doctors and hospitals have eaten up some of those savings. ''The overwhelming issue for everyone will be the Partners agreement,'' said Bruce Bullen, Harvard Pilgrim's chief operating officer. The agreement was announced yesterday.
Tufts executives said the plan's costs also are rising in the following areas: injectible drugs manufactured by biotechnology companies, including drugs for multiple sclerosis that cost $10,000 a month per patient; cancer drugs; radiology tests such as magnetic resonance imaging; hospital stays at the more expensive academic medical centers; and ear surgery for children and carpal tunnel surgery for adults.
In a preliminary survey of 2002 rates, benefits consultant Hewitt Associates said health plans are demanding 20 percent increases in the Midwest, 17 percent increases in the West and Southeast, and 15 percent increases in the Northeast. Companies will try to negotiate down these initial price quotes.
Robert Kennedy, Hewitt's practice leader for health and welfare in Boston, said increases in the Northeast are slightly lower because more people belong to managed-care plans
. In Massachusetts, 52 percent of residents belong to managed-care plans, compared to 29 percent nationally, according to 1998 state figures.
''We're keeping a lid on costs a little bit longer,'' he said. ''We do have folks vested in managed care here. It's efficient, but it's started to erode.''
Health plan executives said they are developing new programs to control costs again, including a wider range of products that would offer employers more options between low-cost plans limiting the choice of doctors and hospitals, and higher-cost plans with wide choice.
Liz Kowalczyk can be reached by e-mail at email@example.com