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Can health insurance premiums be tamed?

What goes up, must keep going up. At least, that’s what has been happening with health insurance premiums in Washington state and across the nation for the last several years.

According to an article published in May by the Washington State Office of the Insurance Commissioner (OIC), health insurance premiums in Washington state rose 38 percent between 2003 and 2009, compared to a national average of 41 percent. An August article in The Olympian stated that the 2012 monthly health insurance premium cost for Washington state employees will rise by almost 35 percent for full-family coverage in the most popular state health plan.

“Premiums are already astronomical,” said Greg Seifert, president and CEO of Vancouver-based Biggs Insurance Services, adding that premium increases are trending between 10 to 20 percent per year in Washington, depending on the carrier.

As an example, Stephanie Marquis, spokesperson for the Washington OIC, said that Kaiser had applied for an 11.4 percent increase for their small employer plan, which is currently under review.

In an effort to slow the rate of increase of premiums, Marquis explained, the Washington legislature passed HB 1220, the “rate transparency bill,” co-sponsored by local representative Jim Moeller. Modeled after similar legislation in Oregon, the bill (which went into effect July 1) requires insurance carriers to make their rate filings public, including a seven-page summary of where the money goes, the carrier’s profitability, how much money goes to claims, and so on.

“Our goal is to tell the public ahead of time, and let them weigh in,” said Marquis.

The OIC has built an interim website for rate increase information (www.insurance.wa.gov/health-rates.shtml), using a $1 million Federal grant. A new web tool will be available this fall, allowing consumers to search rates, post a comment and sign-up to receive an e-mail when a carrier requests a rate change.

Effective September 1, similar federal requirements from the Patient Protection and Affordable Care Act (PPACA) go into effect. Carriers wanting a 10-percent increase or more will be reviewed by the federal government.

Marquis reported that two of Washington state’s major carriers – Regence/Blue Shield and Group Health – supported the rate transparency bill, while Premera Blue Cross opposed it.

“It was unusual for them not to be aligned,” said Marquis.

Experts in the industry such as Seifert and Michael Smith, executive vice president of Fullerton and Company Insurance (which recently bought Clark County-based Nies Insurance), aren’t convinced that state and federal attempts at controlling the cost of insurance are going to have much of an effect.

“There are so many factors that aren’t accounted for by [the PPACA],” said Smith, adding that factors that are considered may still present problems.

“So much of the PPACA is based on tax credits for individuals and small businesses,” explained Smith. “But with our budget crisis, how will these be funded?”

In fact, Smith said, the big question is “whether in 2014, will employer-sponsored health insurance still exist?”

According to Smith, small businesses who have experienced flat or declining revenues during the recession, while still experiencing escalating health insurance costs, may find it more economical to pay an “assessment” per employee and let employees get their own insurance through the state insurance exchange. However, the assessment amount and the state exchanges have not been finalized yet.

“When my clients ask me, ‘what is going to be most cost effective?’ I can’t tell them yet – I don’t know,” said Seifert. “There are more questions than answers right now.”

PPACA requirements that go into effect in 2014 may raise the cost of health insurance, said Smith, such as the elimination of pre-existing condition exclusions for adults and prohibiting insurance carriers from declining people in the individual insurance market.

“These are all good, but everything has a cost,” said Seifert, explaining that the requirements in effect in 2011 have typically impacted rates in a range of one to four percent. More important, said Seifert, is that state and federal attempts to rein in premium increases don’t address the underlying cost drivers, such as inefficient use of specialists, inappropriate use of medical technology and the cost shift from Medicare and Medicaid programs to the private sector.

Seifert said carriers in Washington and Oregon are already operating very efficiently, with about 90 cents on the dollar going back out to the insured in the form of claims payments.

“Washington and Oregon carriers have already been cutting costs to stay competitive,” said Seifert. “I think the carriers will still ask for what they need. If they need 22 percent, then oversight and instant exposure won’t change the numbers.”

Brokers feel the crunch

Seifert said that insurance carriers’ cuts to agent commissions are having a “major impact” on his business.

“We may have to change the way we get paid – we may have to bill our clients directly, instead of getting paid through the carriers,” he said.

Smith said commissions have been “dramatically reduced” over the last five years, by as much as 30 to 50 percent. He said that this trend has prevented his firm from hiring new employees, even though they are doing more business, resulting in employees who are feeling somewhat overworked.

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