Costs jump for health insurance
Survey says local employers are paying over 12% more this year
By Anne Belli
Copyright 2005 Houston Chronicle
Houston employers — hopeful they had seen the end of double-digit increases in health insurance costs — are paying 12.2 percent more to cover workers than they did last year, according to a survey released Thursday.
Last year's costs rose 9.6 percent over 2003, halting a four-year run of double-digit cost increases, offering a bit of relief to companies grappling with the soaring expenses, according to Employee Benefit Solutions, which jointly conducts the annual review with the Houston Business Group on Health.
But the relief was short-lived.
"We thought we were coming back down the slope, but we think it's moving up," Brett Haugh, an Employee Benefit Solutions consultant, told a room full of about 300 insurance providers and benefits managers for some of the area's largest corporations.
What's more, the upward trend likely will increase at the same pace.
"There is nothing that we see that suggests to us that health care costs are going to drop significantly or grow significantly," Employee Benefit Solutions President Jim Watt said.
One reason for the spike is an increase in reimbursements by plan providers to hospitals, several of which renegotiated their contracts with the big carriers in the last year, Watt said.
Houston's aging and fattening work force and a sluggishness on the part of employers to redesign health insurance plans to save money are also drivers of this year's uptick, he added.
"Contracts got renewed, people got a little older and a little thicker, and nobody is doing anything about it," Watt said.
The average medical plan now costs Houston employers $7,526 per worker, compared with $6,705 in 2004, according to the 2005 Healthcare Cost & Benefit Trends Survey. Ten years ago, the average plan cost companies $3,756 per worker — a statistic that drew laughs from the crowd.
"Our costs keep going up," said Jerry May, benefits and compensation manager for CB&I, a Woodlands-based engineering and construction company with about 11,000 employees worldwide.
He said that while the company has been pleased with its insurance provider, it recently sent out requests for proposals for new bids, hoping to hold the line on costs.
Indeed, spiraling health insurance costs are a top priority for managers such as May.
"This is our number one issue," said Rick Huntington, executive director of the Houston group. "It's what everybody is focused on."
The survey also found that while many employers talk about passing on more of the health insurance costs to workers — through higher deductibles, for example — in Houston they generally aren't doing so. Local companies have been paying about 75 percent of the costs of medical plans for workers since 2001, the survey said.
"This dispels the myth that companies are massively shifting the costs to the working individuals," Haugh said. "I'm just not seeing that happening."
Haugh said that while there is an increase in the number of Houston companies offering so-called "consumer-driven plans," they are not catching on as quickly as advocates of the plans had hoped. Such plans combine high-deductible policies with employee-funded health savings accounts, which operate much like retirement accounts, but the savings can be used only for health care.
Advocates say these plans can reduce health care costs because when consumers are spending their own money they pay closer attention.
Eleven employers surveyed offer such plans, compared with one last year, according to the survey.
Watt said consumer-driven plans are slow to catch on because they are designed to allow employees to act more like consumers, shopping for health care like they would for cars or appliances. To work, employees must have access to ample information about the quality of their local health care services, and that kind of information is still difficult to get, he said.