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Employers may be facing smaller premium hikes for 2017

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Thomas C. Embley

Thomas C. Embley, CEO of Precision Air Convey in Newark, said his company’s health insurance costs rose 92 percent since 2014. “If everything was going up like that, we’d be out of business,” he said//Photo by Ron Dubick.

Next bump expected to be more manageable

By Kathy Canavan

Last year, EDiS, the Wilmington construction firm, got sobering quotes from several health-insurance carriers. One would have hiked the price of employee coverage nearly 75 percent. After much fact-finding, EDiS settled on paying somewhere around 15 or 20 percent more to obtain coverage for 80 employees. “We spent an inordinate amount of time in research and negotiation because we want to make sure that, to the best of our ability, we’re contributing to the family that we have here at EDiS, President Brian DiSabatino said. “The health-care benefit is supposed to be a bond between the employer and the employee, and, instead, because of regulation, it’s become a stress point.”

Employer-sponsored insurance covers half of the non-elderly population in the United States – about 150 million people. Just over half of all firms offer health benefits.

The average annual premium for family coverage was $18,142 in 2016, with employers picking up 70 percent of the tab, according to the Kaiser Family Foundation’s latest Employer Health Benefits survey. Premium costs have risen gradually, but deductibles have spiked. Since 2010, the cost of deductibles and the employees’ share of those deductibles, taken together, have risen 67 percent, according to Kaiser. That’s almost seven times as fast as wages.

Les Dukart, who owns seven McDonald’s in Delaware and four in Pennsylvania, said he feels bad for his employees who see costs rise every year, even though Dukart Management Corp. pays such a big chunk of the costs.

The franchise obtains health coverage through McDonald’s, which he said is very reasonably priced compared with other plans. Dukart said his Delaware costs are always slightly higher than the prices for his Pennsylvania stores. “Delaware’s more expensive than most states because they don’t have enough competition. Christiana Care’s pretty much a monopoly,” Dukart said.

“The Delaware hospitals are running 25 percent higher than the national average,” said Insurance Commissioner Karen Weldin Stewart. “Prescriptions are higher too.”

Delaware’s inpatient costs were $2,748 per day in 2014, according to Kaiser. That compares with $2,236 in neighboring Pennsylvania and $2,504 in Maryland.

Dukart says he’ll be much more ready for price hikes this year than he and other employers were when prices suddenly soared in 2014 as the Affordable Care Act kicked in.

Although nothing is in concrete until the federal government approves proposed rates, it appears the rate hike on the horizon for 2017 will be much smaller than recent years.

After nearly 100 percent increases in 2014, 16 percent increases in 2015 and 13 percent hikes this year, the 2017 hikes are likely to be single-digit, experts said.

The rates are projected to be so much lower that some small businesses that dropped employee health insurance two years ago are inquiring about policies again, said Nicholas A. Moriello, CEO of Health Insurance Associates.

“It is a good sign that the increases were lower in 2016 and we already know they’ll be lower again in 2017, but it’s not going to feel positive to an employer currently facing a 13 percent increase on a rate that they feel is already challenging,” he said.

Thomas C. Embley, CEO of Precision Air Convey, the Newark manufacturer of trim removal systems, said his company saw a 92 percent increase in health-care costs between 2014 and this year.  “If everything was going up like that, we’d be out of business,” he said.

Embley is happy the rate increases likely will be lower, but he’s not confident some other element, such as deductibles, won’t rise.

“It’s like they’ve taken the electric windows off the car,” he said. “They lower the price, but they take a lot of the options away.”

“It’s absolutely more cost for less value every single year, and I don’t believe that any of this change in health care has been positive for the worker, and it’s definitely not for the employer,” Embley said.

Highmark Blue Cross Blue Shield, the biggest player in the Delaware marketplace, has requested for a 2.7 percent hike in 2017. Moriello said companies are getting better data as more businesses insure all of their employees, and it’s easier for insurers to predict costs.

Insurance Commissioner Stewart said the data is probably leading the lower rate: “You need five years of data to have any kind of credible data, and, in the past two years, Blue Cross Blue Shield had increases in their small group. Maybe this is an indicator that it’s starting to level off because they’re getting more credible data,” she said. “We won’t know yet. We follow their financials, but we won’t know until the fourth quarter how they’re doing in 2016.”

Moriello said more insurance companies are coming into the Delaware market, too, although some of them are aimed at companies with large and mid-sized work forces.

While hikes for group health are expected to be smaller, individual policies may rise as much as 30 percent, Moriello said.

He said the lower rate hikes for group plans and the higher rate hikes for individual policies are prompting calls from several small businesses that gave up group coverage in 2014. Employers and employees are rethinking insurance because the costs can be put through the businesses and the employee portion can be paid on a pre-tax basis.

Some companies offered workers raises in lieu of health coverage in 2014, but workers realized their insurance coverage was not a taxable benefit but their raises were taxable. Some employers saw their workers’ comp costs rise because the raises added to the companies’ payrolls and workers’ comp insurance costs are based on payroll.

“We small businesses get nickeled and dimed to death,” said Bob Older, chairman of the Delaware Small Business Chamber. “This year, small business is dealing with a minimum-wage increase, and then we have a health-insurance increase.”

Older said he was stunned by a recent mailing that showed his insurance had paid $900 for a doctor’s visit. “I called the office and I said why did this cost $900. They said it was a specialist. I don’t care who’s doing it. If that surgeon general saw me for 15 minutes and charged $900, it would still be outrageous.”

EDiS’ DiSabatino predicts a change in the marketplace as medical costs rise and the doctor-patient relationship is fading as doctors take on more patients.

“I think we all yearn for the day when our health care was personalized, but, instead, we’re pushing out of the husband-and-wife doctor operation towards these mega-production offices where they barely remember your face let alone your name,” he said.

“If we’re going to lose that personalization, I think you’re going to see choices made differently.”

He predicted patients may vote with their feet if costs continue to rise and doctor-patient relationships continue to flag: “You’re starting to see moms and kids, who, instead of taking a 10 o’clock appointment at the doctor’s office on a school day, they’re going to Med Express for their physicals. The marketplace is beginning to shift. The consumer wants to consume health care on their own schedule, now that the face of the doctor doesn’t matter.”

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1 Comment

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    Vanessa Isaacson October 13, 2016

    For small businesses struggling with tight budgets, these increases – whether they are smaller than expected – cannot keep happening. Small businesses are desperate for affordable healthcare choices – options that they can count on to not increase year after year. It’s scary to think that less than 50% of small businesses offer health benefits even though offering health benefits is so important to the strength and value of a small business. The Small Business Healthcare Relief Act would bring a lot of these types of choices back to small businesses. If this bill passes, small businesses (with less than 50 employees) will be allowed to legally reimburse employees for premiums and out of pocket expenses, essentially giving small businesses these much needed affordable healthcare options. I encourage all small employers to learn more and support the bill: http://zane.tips/1haqgnO.

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