One of Western New York's three big health insurers is projecting that most of its employer clients will see rate increases of as much as 19 percent next year, putting the Buffalo area potentially well above national expectations for premium hikes.
Independent Health Association said premiums hikes for most companies in 2009 will range from 8 percent to 19 percent, with actual rates varying depending on whether the employers make changes to their current plans and how much the coverage is used.
Specifically, small companies that are "community-rated" -- where their rates are based on the claims experience of the broader community -- will see an average rate increase of 11.5 percent, the Williamsville-based insurer said. Some large employers that are "experience-rated" will see even higher increases, even as much as 50 percent, if their workforce incurred significant expenses the previous year.
However, pharmacy costs will come down substantially for those experience-rated clients. The region's second-largest insurer said it expects to lower drug costs by an average of 19 percent for large employers, a result of numerous efforts it has undertaken in recent years. Small employers in the community-rated HMO will see just single-digit increases in drug costs, the company said.
Those efforts include having its own pharmacy benefits manager to avoid paying a third party, while negotiating lower costs for its pharmacy network, officials said. The insurer also works with doctors and patients to encourage use of cheaper generic drugs, especially with cholesterol-lowering statins.
"It would be nice to have single-digit increases across the board, but we're in a marketplace that is challenged," said John Rodgers, executive vice president and chief marketing officer at Independent Health. "We're trying to manage that."
Last year, rates for Independent Health's community-rated plans increased about 18 percent, so the latest rise is smaller, indicating some success in controlling costs. The insurer said it expected the final increases to be lower, as employers opt to change the plans by raising deductibles and copays, sharing more of the premium with employees, or even shifting to a cheaper plan altogether.
Such steps are typical, but employers elsewhere are also trying new tactics, even capping drug outlays and instituting drug deductibles before copays kick in. Some are also imposing surcharges for covering dependents, especially working spouses. But they're also getting worried about how far to carry that cost-shifting before it hurts recruitment or deters employees from seeking care.
Among rivals, Univera Healthcare said it plans to take the full time allowed by state law to calculate its rates, which means they won't be finalized until the end of November -- 33 days before the rates take effect.
BlueCross BlueShield of Western New York, a unit of Buffalo-based HealthNow New York, does not have estimates for the bulk of its business, which varies significantly from employer to employer because it is experience-rated. But spokeswoman Karen Merkel-Liberatore said community-rated employers, representing 25 percent of its total business, will see an across-the-board increase of about 16.9 percent. Individual clients will see increases ranging from 9.8 percent to 24.4 percent, she said.
"As hard as we work to deliver the most dependable and highest-value healthcare coverage to our members, we cannot reverse the rising healthcare costs on our own," Merkel-Liberatore said.
Even so, the projected rate hikes locally appear to be bucking the national trend that has seen premium growth slow to single-digit rates. In fact, the projections here are well above national averages cited last month by employee benefit consulting firms Mercer Consulting and Hewitt.
New York-based Mercer, a unit of Marsh & McLennan Cos. and affiliate of brokerage Marsh USA, said rates are expected to rise 8 percent in 2009 if employers don't make any changes to their current plans. Small companies with fewer than 500 workers will see hikes of 10 percent. That's based on a survey of 1,300 employers.
Similarly, Chicago-based Hewitt Associates projected a 6.4 percent increase for 2009, up slightly from 6 percent in 2008 and 5.3 percent in 2007. Specifically, the firm expects HMOs will go up 8 percent, PPOs and point-of-service plans up 5.5 percent, and traditional indemnity plans up 6.5 percent.
A report Thursday by advocacy group Families USA found that family health care premiums in New York state rose 7.3 times faster than workers' earnings from 2000 to 2007, with premiums rising 80.7 percent or $5,722 in that time. By contrast, median earnings rose by $3,110, or 11 percent.