Savings dent outpaced by health care increases

Health care costs, already rising more than twice the rate of inflation, could increase this year at an even faster pace, according to officials with Tennessee's biggest health insurer.

Most employers insured by BlueCross BlueShield of Tennessee last year trimmed the double-digit rate increases quoted to renew their existing plans by raising employee deductibles, premiums and co-payments. But faced with further cuts in Medicare and Medicaid payments and increases in the number of patients without any health insurance, hospitals and doctors are raising their commercial rates by bigger amounts this year to make up for the shortfall.

"We are seeing some significant rate increases being requested by providers right now, although we're working to do what we can to hold down those costs," BlueCross President Vicky Gregg said Tuesday.

The Chattanooga-based health insurer -- the state's biggest with nearly 3 million members -- has managed to stay in the bottom quartile of rate increases among health insurers, Mrs. Gregg said. In a meeting with editors and reporters at the Times Free Press, Mrs. Gregg likened her company's relative advantage to the woman standing between two ugly sisters.

"We may look better than who we are standing next to, but it's still an ugly picture from the consumer perspective," she said. "These increases are two to three times any increase in wages or overall inflation."

In 2009, the average Tennessean paid 7.7 percent more to renew his or her individual BlueCross health plan. Most employers held their premium rate increases down in 2009 to around 4 or 5 percent, but only after changing their plans to require workers to absorb more costs or risks.

Beneath those averages, employers are experiencing wide variations in the price increases quotes for health insurance. While a few employers enjoyed rate reductions, some had to pay as much as 41 percent higher premiums to keep their health plans, BlueCross' chief actuary Jim Srite said.

"The increases reflect the rising cost of health care and, in many instances, the adverse selection we're experiencing in this economy," he said.

Russ Blakely, an employee benefit consultant who brokers health plans for a number of insurers, said employers are being hurt in their health experience rating when they trim staffs. Layoffs usually affect younger, healthier workers and also require the employer health plan to absorb increased COBRA costs for displaced workers.

"After two or three years of staff cuts by many employer groups, we're seeing a slowdown in layoffs and downsizing," Mr. Blakely said. "I'm hoping we're bottoming out. But in a flat economy the 10 to 15 percent increases most employers are being hit with for their health care plans is very hard to stomach."

Mr. Blakely said most employers are raising what workers and their families pay for a physician office visit and for name-brand prescription drugs. Deductibles and employee premiums also are being raised, and many employers are shifting to more consumer-driven plans such as health savings accounts.

Insurance companies, as well as the people they insure, also are having to absorb more expenses, Mrs. Gregg said.

After losing $95.6 million on its TennCare coverage during 2009, BlueCross officials fear more budget cuts by the state could force more painful surgery of TennCare payments and access.

"In July, we may be looking at another cut, and if we are that will be a real struggle," Mrs. Gregg said. "We've got to get in a better position."

BlueCross is cutting $25 million in payments this year through a 14 percent rate cut to specialty doctors and some hospitals in the TennCare plan. BlueCross also plans to work to better manage chronically ill TennCare recipients, Mrs. Gregg said.

Congressional health care reform proposals, if adopted as approved by the House and Senate last year, could push nearly 30 million more Americans into Medicaid plans such as TennCare.

"Medicaid doesn't pay costs, and they are looking at putting a lot more people in it, which in all likelihood will result in more shift to other health insurers," Mrs. Gregg said.