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Health coverage rates on the rise
AREA increases AS MUCH AS 30%
By GRACE WYLER
Ink on the health-care- reform bill barely has dried, yet the cost of health-care coverage continues to rise.
Insurance companies, responding to the rising cost of health care and prescription drugs and perhaps looking to forthcoming changes in the system, are raising premiums on employer- sponsored health-care plans.
Some businesses in the region have seen rate increases as high as 30 percent this year, according to local insurance brokers and insurance providers.
“We have seen larger annual-rate increases,” said Robert Lackey, an agent at First Place Insurance in Boardman. “We’ve seen increases on group health plans between 7 [percent] and 8 percent, and in some cases as high as 20 [percent] or 30 percent, depending on the profitability of the group.”
City Machine Technologies, an equipment-refurbishing company in Youngstown that employs 74, has had a 30 percent increase in health-insurance costs over the past two years, said Claudia Kovach, the company’s human- resource representative.
“There is no tangible reason for the increase,” she said. “It has just snowballed.”
Employee health coverage is the company’s single-largest expense, Kovach said. City Machine Technologies spends almost $600,000 a year on employee health benefits.
“We are not talking about steel or machine parts; this is the intangible cost of doing business,” Kovach said. “We are just trying to provide good benefits for our employees.”
In 2010, insurance providers in Ohio raised rates by an average of 12 percent to 15 percent, according to Anne Jewel, assistant director of insurance policy with the Ohio Department of Insurance. This year’s increases are slightly higher than they have been in the past few years, when rates increased by an average of about 10 percent.
Rate increases are largely due to the rising cost of health care, Jewel said.
“What is driving the rates are medical costs,” Jewel said. “Rates are determined by the number of procedures and the expense of those procedures.”
This year’s premium increases follow a trend that has developed over the past decade.
In Ohio, the cost of family coverage through employer-sponsored health insurance rose 76.5 percent between 2000 and 2007, according to a 2008 report from Families USA, a health-care advocacy group.
Nationally, the average premium for families with employer-sponsored coverage rose 131 percent between 1999 and 2009, according to the Kaiser Family Foundation.
Premium increases over the past few years can be attributed to rising prescription-drug prices and more frequent use of expensive procedures, said George Stadtlander, chief managed-care officer of Medical Mutual of Ohio.
The economic downturn also has contributed to the rising cost of employer-sponsored health-care plans, Stadtlander said. When an employer makes staff cutbacks, the work force becomes smaller and, in most cases, older.
“You could get a 3 [percent] to 5 percent increase just because of the age of the group,” Stadtlander said.
It is too early to tell if and how employer-sponsored health-care plans will be affected by reform legislation, insurance brokers and providers said.
“There is much unknown still,” Deborah Spano, a regional spokesperson for United Healthcare, said in an e-mail.
Some local brokers predicted that the costs of premiums will rise even more as health-care reform goes into effect.
“The cost of premiums is based on the rising cost of health care and prescription drugs,” said Al Schinagle Jr., a consultant with Employee Benefits Agency in Chagrin Falls. “But this reform will raise the premiums because of mandates on the insurance companies.”
Insurance companies, faced with new mandates and continued medical inflation, will have to raise premiums to protect their profits, Lackey said.
Ray Kashmiry, president of Boardman insurance brokerage R. Kashmiry and Associates, disagreed.
The health-care legislation will lower costs by spreading the risk over more people, Kashmiry said.
“The system needs to get more people insured,” Kashmiry said. “The cost of health care will be reduced by getting more people into the system.”
Although consumers might not see premiums go down right away, the health-care reform eventually will lower costs, said Ron Pollack, executive director of Families USA.
The cost of health care will go down as more people are insured, Pollack said. The high cost of health care is partly due to the cost of caring for the uninsured, he said.
The health-reform bill also will require insurance companies to limit spending that is not directly related to providing coverage, including executive compensation, marketing and administration, Pollack said.
“Are we going to feel all of the effects very quickly? No,” Pollack said. “In the long run, it will have a very helpful impact on getting premiums moderated.”