It’s well known that health insurance costs are rising in Nevada. “Over the past five years, we’ve seen premiums increase by almost 100 percent,” said Ty Windfeldt, sales and service director for Hometown Health, a not-for-profit company owned and operated by Renown Health (formerly Washoe Medical Center).
What may not be well known, however, is how employers and health insurance companies are reacting. Their responses run the gamut from slashing or eliminating benefits to instituting programs that make employees more accountable for their healthcare.
Why the Cost Increase?
Several factors contribute to the growing costs of health insurance. The price of healthcare itself – physician services, hospitalizations and prescriptions – is escalating. New technology and pharmaceuticals are expensive.
In addition, when it comes to healthcare, people demand the best. “We want to have it all, and we don’t want to wait in line,” said David Dahan, chief executive officer of Orgill Singer, an insurance agency based in Las Vegas. “We want many different providers to be available to us in a timely fashion. We want them to be educated. We want everything. There is a cost to that.”
As the population ages, more people are utilizing services. “Because of the large baby boomer population, a disproportionate number of people are now reaching the age where they have some major medical situations,” said Omar Rodriguez, senior vice president of market development for Fiserv Health, a company that builds customized health plans for large employers.
Inefficiencies in the healthcare system are costly. One example is the current system of transferring and disseminating patient information from one provider to another. Because that system is inefficient, providers don’t always receive all the necessary information, which sometimes results in inadequate care, often with a very costly outcome.
With shortages of professionals – nurses, pharmacists, respiratory therapists, radiology technologists and more – healthcare entities must pay premium dollars to hire people from placement firms.
In addition, inadequate government reimbursement to care providers for healthcare services causes care providers to shift the financial burden onto those who can pay. Similarly, the insured wind up paying for the uninsured and underinsured population. According to Mike Murphy, president and general manager of the Anthem Blue Cross/Blue Shield for Nevada Plan, this population consists of three segments: people eligible for government programs who aren’t enrolled or engaged in them; people with household incomes greater than $50,000 who don’t see value in health insurance companies’ offerings; and people with lower incomes, said Murphy.
The uninsured typically pay less than 1 percent of billed charges, according to the Nevada Hospital Association. Consequently, providers must write-off the remaining balances as bad debt, and the cost of that gets shifted to people who do have insurance coverage. In 2005, premium costs for family health insurance coverage provided by private employers included an extra $922 in premiums due to the cost of care for the uninsured; premiums for individual coverage rose by $341, according to a report from Families USA, a non-profit organization dedicated to achieving high-quality, affordable healthcare for all Americans.
At least 18 percent of Nevada’s residents are uninsured, and an additional 20 percent have inadequate coverage, according to the Henry J. Kaiser Family Foundation’s 2005 State Facts report. Nevada ranks eighth on a list of states with the greatest number of uninsured, according to data provided by insurance provider Aflac Inc.
The Employees’ Perspective
As the cost of health insurance rises, so does the demand for it from potential and existing employees. “People flock to the companies that offer benefits,” said Sandra Liechty, president of the Southern Nevada Human Resources Association and vice president of group services for Custom Benefit Consultants, a health insurance broker. “I’ve seen people leave companies and then go back because of the benefits package. The pay was comparable, but the benefits were so much higher.”
Mike Rainey, president of the Northern Nevada Human Resources Association, said he’s even seen people opt for a lower-paying job that offers good benefits instead of a higher-paying job with fewer benefits.
When it comes to perks, health benefits are critical. “Potential employees not only look at their salary and wages, but because of the cost of medical care, the benefits part of offering compensation plays a very critical part in recruiting and retaining employees,” Rainey said.
Further complicating the issue, “Many employees have an entitlement mentality, believing that employers owe them benefits,” Liechty added.
The Employers’ Point of View
Employers have to weigh their employees’ expectations of benefits against their companies’ budgets. “Clearly, employers have to engage in a balancing act,” said Don Giancursio, senior vice president of sales and marketing for Sierra Health Services Inc., Nevada’s largest healthcare insurance provider. “They want to provide benefits. In most cases, they need to provide benefits to attract and retain employees.”
One camp of employers views health benefits as an expense that needs to be reduced, Rodriguez said. Some companies, particularly the smaller ones, reduce the cost by eliminating benefits. “When you force an employer to choose between eliminating benefits or going out of business, they’re going to eliminate benefits,” Liechty said.
Another option is to scale back on benefits, offering employees coverage in the form of limited health insurance plans. “(The plans) aren’t meant to take care of serious illness,” Dahan said. “They’re just meant to help out.” Other companies shift more of the premium costs to the employees or offer health benefits only to employees in select jobs. Others avoid having to provide health benefits altogether by hiring only contract and part-time employees. “This creates a repeating cycle that ultimately increases the pool of those without insurance or without adequate insurance,” said Josh Charlebois, communications specialist for Saint Mary’s Medical Center.
Some employers prioritize their benefits. They may reduce perks in one area – for example, the holiday party – to supplement in another: health insurance. Some extend the period of time before new employees become eligible for health benefits.
The remaining camp of employers is working to turn their employees into better, more active consumers of healthcare. “Business owners, CEOs and CFOs are all taking a very involved role in the process of renewing their health plans,” Windfeldt said. “Five years ago, they didn’t care about the cost of health insurance. They just knew they had to have it. Today they’re taking a more proactive approach.”
Active consumers use healthcare more wisely, thereby driving down insurance costs. “There’s a little bit less abuse, better understanding and better budgeting,” Dahan said.
More and more employers are sharing with their employees information about what health insurance coverage costs them.
“When you quantify the benefits package for an employee, it’s about educating and getting them vested in the process, letting them know that healthcare is not $20. Healthcare is more like $300,” Dahan said.
Saint Mary’s Medical Center, for instance, provides all its employees with a document once a year that shows the cost of their benefits package, including the costs being absorbed by Saint Mary’s. Transparency is key because employees frequently don’t know the actual costs of their insurance premiums or of healthcare in general.
“Our industry hasn’t done a great job of making people accountable for their actions in the last 15 to 20 years,” Giancursio said. “We designed plans that insulated people from what the true costs of care were. They became reliant on plans with low co-pays. That just doesn’t have any semblance or make any sense relative to the actual costs for the services.”
Employees are instituting health and wellness programs – Weight Watchers and yoga, for example – at the workplace to encourage healthier lifestyles. Some employers engage outside vendors, including health insurance companies, to provide the services. Others do it in-house. Sierra Health Services, with its Health Plan of Nevada insurance coverage, offers employers wellness plans that cover everything from smoking cessation to disease management. “Knowledge is power, and employees who make the tangible connection between wellness and reduced healthcare costs are more inclined to live healthier lives,” Charlebois said.
Often, programs are tied to financial or other incentives for employees. State of Nevada employees who complete a wellness assessment get their health insurance deductible cut in half. Saint Mary’s offers financial rebates to employees who meet certain positive health criteria factors, such as blood pressure, cholesterol, body mass index and no-tobacco-product use. Employees who use Saint Mary’s on-site fitness center at least 120 times a year also are eligible to get money back.
“By encouraging wellness through a healthy lifestyle, healthcare costs can be controlled because fewer services are needed,” Charlebois said.
Some larger companies are paying to have their employees evaluated for their wellness level and health risk factors and then implementing customized disease-management programs for each person. “I think it’s a concept that will get some traction and potentially be applicable in the smaller and mid-sized accounts going forward,” Giancursio said.
Hometown Health began offering its employer groups this service last August. It surveys a company’s employees with a confidential health assessment questionnaire and conducts laboratory tests. After analysis, it provides each employee with a confidential report that outlines specific risk factors and areas for focus. It also provides the employer with a similar, comprehensive report that highlights the group’s risk factors. With the employer, its staff develops strategic plans to improve employee health.
“You can’t just create one size fits all – employers are so different,” Windfeldt said. “We try to tailor-make programs for the specific employer that will provide them with an outcome – something that’s measurable.”
With its WellCheck Program, Saint Mary’s Health Plans has provided customized programs to many of its covered employers, such as the Washoe County School District, the Silver Legacy and Sierra Pacific Power Co. These offerings range from individual classes to health-assessment programs to complete wellness plans.
Fiserv provides a disease-management plan for 6,000 Station Casinos employees in Southern Nevada. Two of its measurable initiatives include ensuring that expectant mothers receive the best medical care prior to delivery and ensuring that levels of breast cancer screening improve year after year. In addition, Fiserv has bilingual customer service representatives on site periodically at each Station Casinos location to assist employees. The insurance companies offer employers a host of tools to help them predict future health-insurance-related costs based on their employees’ current health. “We have the ability to tell a customer that in this one location of their operation they have 83 women over the age of 40, and 13 of them had a mammogram this year and five had breast cancer,” Rodriguez said.
The Role of Health Insurance Companies
Along with offering health risk assessments and disease management plans, health insurance companies have been introducing insurance plans that put the onus on the healthcare consumer. These plans, called consumer-driven health plans (CDHPs), are high-deductible (generally $2,000-plus) health insurance plans with tax benefits. One such plan, the Health Savings Account (HSA), is a tax-exempt trust that’s set up with a qualified HSA trustee to pay or reimburse certain medical expenses that the insured incurs. The employer and employee both can contribute tax-free dollars. Contributions to the account roll over from year to year and employees can take their HSA with them if they change employers.
“HSAs offer employees a way to actively contribute to their own healthcare needs while reducing their tax burden,” Charlebois said. “They empower consumers to take control of their own health spending, while also helping them understand the true costs associated with providing care.”
In fact, 25 percent of Americans covered by consumer-driven health plans were more likely to engage in healthy behaviors, and 30 percent were more likely to get an annual checkup, according to a 2005 national study by McKinsey & Co.
HSAs aren’t ideal for everyone, however. “An HSA will work for an affluent, white-collar individual who understands how to use it,” Giancursio said. “It doesn’t work for someone on the lower end of the wage scale with chronic illnesses.”
Some insurance companies, such as Sierra Health Services, offer employers a base plan and a buy-up plan. Employers often will pay the costs associated with the base plan and make the buy-up plan, which offers more options, available to employees at their cost. Some larger clients have three or more insurance plans. The Las Vegas Chamber of Commerce, for example, which insures about 2,500 employees, has a handful.
Insurance companies also are boosting health insurance plan deductibles. “As recent as three years ago, it was very uncommon to see an out-of-pocket maximum of more than $3,000 to $4,000,” Liechty said. “Now, I’m seeing out-of-pocket maximums of over $10,000. That’s becoming more of the norm.”
Insurance companies also are moving to higher co-pays, for example, $50 co-pays for specialists. They’re more diligent about requesting Health Insurance Portability and Accountability Act (HIPAA) Certificates of Prior Creditable Coverage so they can apply pre-existing restrictions to plans.
They’re also working to better educate healthcare consumers. “Informing the consumer is like magic,” Dahan said. “The consumer will make the system a better system. It works in every industry, and there is no reason that it should not work in healthcare.”
Hometown Health provides quarterly newsletters to its consumers, informing them about a host of topics from necessary medical checkups to selecting a primary care physician. It also provides a 24-hour nurse hotline for people in need of medical advice. “[As a result] we’ve seen the number of emergency room visits fall off dramatically and consumer satisfaction increase,” Windfeldt said.
Some insurance companies are steering people toward generic options for prescriptions, which are less expensive than brand options. Insurance companies are also negotiating for better rates with physicians and hospitals; and they’re implementing administrative technology, such as electronic claims handling, interactive telephone systems and Web-based applications, to improve efficiency and reduce costs.
On the Horizon
Moving forward, expect the health insurance industry to offer even more new products. Anthem Blue Cross/Blue Shield, for example, will introduce its Lumenos CDHP products this year, which cover preventive care and health coaching while rewarding plan purchasers for choosing healthier lifestyles. Also this year, Anthem plans to launch a system to provide employees and members a better way to capture personal data for easy and efficient transfer between doctors and hospitals. In addition, it’s working on products and services for smaller employers, and investigating ways to provide coverage to more uninsured people.
The future looks good to Giancursio. “I think we probably will continue to work our way through some of the challenges that face us as an industry,” he said. “Politics play a big part of that. The changing of the guard [in Washington, D.C.] will have an impact. At the end of the day, I believe as an industry we’ll collectively rally to come up with solutions. The goal is to provide quality, affordable coverage.”
