WBUR

As Health Insurance Premiums Rise Slowly, Patients Urged To Shop Around

BOSTON — Employers across the state sit down this month for an annual meeting that many dread. It’s a briefing on how much their health insurance premiums will increase come January. WBUR’s Bob Oakes spoke with reporter Martha Bebinger about what employers can expect.

Bob Oakes: The bad news is that premiums, on average, are still rising. But the good news is that many businesses will see about the same increase or slightly lower increases than last year. What’s the range?

Martha Bebinger: Last year, premiums rose 4-10 percent. This year, the increase is expected to be slightly lower, 3-6 percent. Keep in mind that these are so-called base rates. The actual rate for your company could be higher or lower, depending on the age of the employees, how much care they use and a few other factors.

(Note: Fallon Community Health Plan declined to provide their expected rate increases).

But what about this new state law that says health care costs aren’t supposed to rise any faster than growth in the state’s economy overall? With these premium increases, health care is still growing faster than most other costs. What happens?

Nothing right away. The state will eventually require hospitals, physician groups, insurers and others who deliver health care to submit plans for bringing their costs down if they exceed the state health care spending targets. But that won’t start until 2015 or 2016.

So premiums for most of us are expected to rise 3-6 percent, more or less depending on our health and the health of our colleagues. Why will we see slightly lower increases? Is Mass. figuring out how to get a handle on health care costs?

It’s not clear, Bob. There are a number of things happening to slow the rise in health care premiums. Hospitals and doctors are agreeing to lower increases in the contracts they sign with insurers. And patients are seeking less care. This could be the ongoing effects of the recession, and patients putting off elective knee surgery, for example. It could also be that more and more of us have health insurance that doesn’t cover all the costs of a test or treatment. Some patients with a high deductible or higher co-pays are putting off or just not going to the doctor or hospital to avoid those costs.

Brian Pagliaro, Senior Vice President for Sales at Tufts Health Plan.  (Courtesy of Tufts Health Plan)

Brian Pagliaro, senior vice president for sales at Tufts Health Plan. (Courtesy of Tufts Health Plan)

More employers are buying coverage with high deductibles or other types of insurance to save money. What kind of changes should patients be ready for?

High-deductible plans are a common way that employers save money. These plans are cheaper because they shift some of the cost to the patient. Employers can save even more money by cutting expensive hospitals out of their coverage. This is what’s known as a limited network plan. And the fastest-selling product for a few insurers is what’s known as tiered coverage. With tiered health plans, patients can go wherever they want, but they might pay $2,000 or more to deliver a baby at Brigham and Women’s Hospital, for instance, and nothing at, say, Melrose Hospital.

Brian Pagliaro, senior vice president for sales at Tufts Health Plan, said “our objective is to steer patients to the highest quality, most cost efficient providers in the network.”

So insurers want patients to think more like consumers or shoppers when they need health care. This is a big and complicated change that most of us hear about from our employers. Are employers keeping up with all these changes?

They’re trying. I sat in on a forum earlier this summer run by Associated Industries of Massachusetts (AIM), the state’s largest employer group. There were three employers on a panel and they had all switched to these tiered plans. Bill Grant is the CFO at Cummings Properties, a major commercial real estate firm in Woburn. Grant likes tiered plans because employees can still go wherever they want, but they have to think about the cost of that choice.

With Cummings’ plan, “the Boston teaching hospitals tend to be tier three, and you will pay for the first $2,000,” Grant explained. “Conversely, if you seek a tier one hospital, you will have no deductible. The person has the ability to decide what they want and hopefully be a little more educated.”

Cummings has had a wellness program for years that encourages employees to have a yearly checkup and other tests. But the program was not doing much to help Cummings save money. The company shaved 3 percent off its premium increase by switching to tiered coverage.

Not all Boston teaching hospitals are in the most expensive tier one category and not all hospitals outside Boston are tier three. And, a hospital might be tier one under one insurance plan and tier three under another; there’s no standard rating. So patients really have to do their homework with these insurance plans, and that’s part of the goal, says Sandy Reynolds with AIM.

Bill Grant, CFO at Cummings Properties, and Sandy Reynolds, Executive Vice President at Associated Industries of Massachusetts, answer questions from employers trying to cope with rising health care costs. (Courtesy of Associated Industries of Massachusetts)

Bill Grant, CFO at Cummings Properties, and Sandy Reynolds, executive vice president at Associated Industries of Massachusetts, answer questions from employers trying to cope with rising health care costs. (Courtesy of Associated Industries of Massachusetts)

“We do like the tiered concept because, as Bill just described, employees still have complete freedom of choice as to where they go, but there are consequences,” Reynolds said. “It starts to have the purchase of health care work the same way it works when we purchase other things, almost everything else in our lives.”

Which has not been the case for health care. If you have insurance, for the most part, you go where you want, and you don’t have to pay attention to the price of your care. So are employees ready to shop for care? In a word, no.

Howard Grant, the CEO at Lahey Health System in Burlington, says he had many disgruntled employees during the company’s first year with tiered coverage. Grant says he reminded employees who complained about tiered coverage that Lahey wasn’t cutting their choices, just asking them to pay more to use a more expensive hospital.

“But we also reminded our employees that we were spending $66 million a year on health insurance, increasing at 10-15 percent clips every a year,” Grant said. “Our ability to sustain fair compensation for our workforce, and our ability to continue to support a very generous pension plan and all the other benefits were in large part dependent on our ability to control what was the only component of our cost structure that we hadn’t been able to manage, historically, very well.”

“Sound familiar?” Sandy Reynolds asked as she looked across the audience. Many employers nod. Reynolds cautions employers that they will need to spend a lot of time explaining to their employees how these plans work. Cummings started explaining the change a year before switching to tiered coverage.

Tiered plans are triggering some big changes in companies that have made the switch. Eleven percent of Cummings workers moved to a new primary care doctor to avoid a higher co-pay. At Lahey, well over half of the employees switched doctors, in many cases to a doctor at Lahey, which happens to be in the low-cost, high quality tier one category. Not surprisingly, Howard Grant is pleased.

“We’ve only got six months of data so far, but we’ve seen big reductions in expense,” Grant said. “Because [employees] flipped to providers that had the best qualitative track record and the best cost track record. So we’re seeing the value already in a short period of time.”

Peter Sullivan, who runs a small real estate business, listens for tips on how to cut, not just control, rising health care costs. (Courtesy of  Associated Industries of Massachusetts)

Peter Sullivan, who runs a small real estate business, listens for tips on how to cut, not just control, rising health care costs. (Courtesy of Associated Industries of Massachusetts)

Lahey expects a 4 percent premium increase next year by continuing the tiered coverage. That’s much better than past years, but not good enough for many employers, including Peter Sullivan. Sullivan, who runs a small real estate firm, says his annual health insurance increases have become unbearable.

“I need the cost of insurance to go down by 20 percent,” Sullivan told the panel at this AIM forum. “I wonder if you could focus some of the discussion on how to cut the cost of insurance.”

“What can someone really do, Jim?” Sandy Reynolds asked Tufts Health Plan CEO Jim Roosevelt.

Roosevelt says one way employers and employees can really reduce costs is by agreeing to limit their care to community hospitals — as with a plan that Tufts administers for Steward Health Care.

“But, to my mind, that’s a radical choice,” Roosevelt said. “If you want a dramatic change, like 20 percent in your premium, you have to make a dramatic change in your health plan.”

Which we’ll likely see more employers doing as the state and the nation try to bring health care spending down to a manageable level.

Are you trying to figure out how a tiered or limited network plan works? Tell us your story here. We’ll air some of your comments during All Things Considered on Wednesday.

Please follow our community rules when engaging in comment discussion on wbur.org.
  • Zentropic

    “Tiered” pricing is akin to rationed care, to the extent that some employees will be priced out of access to certain hospitals.  That is not necessarily a bad thing, however, because virtually all American hospitals have very good technology and very good people.   But if I have a brain tumor, I think I’d still pick Brigham over Winchester Hospital…

    • Marthab

      Yes – a $2,000 co-pay is out of the question for many people.  Good mention – thanks!

  • Susan Davis

    As a provider for many insurance companies, I watch my patients’ premiums rise,as well as deductibles and copays . However, the amount I am paid by the insurance companies to provide quality and consistent services has remained the same for years. I cannot remember a “raise” in my payments.
    Furthermore, there is a wide range in the amount paid by different companies for the same services. To whom is the revenue raised by the increase going ? Clearly not the service provider.

    • Martha Bebinger

      Hi Susan – I don’t know who you work for, but insurers say most of the major hospitals and physician groups are still seeing increases in the contracts they negotiate with the health plans, although less than in past years.  Most of these contracts include nondisclosure clauses, so we don’t see the real terms.  Thoughts?

  • J__o__h__n

    For years we have heard that wages aren’t rising due to health care increases.  Now that costs are being shifted to employees in the form of more choices that we don’t want and higher deductibles, will any of the saving result in wage increases? 

    We should have universal health care instead of this public private hybrid mess. 

    • Martha Bebinger

      Hi John – great question.  

      At this point, since health care premium increases are still rising faster than most other items on an employer’s balance sheet, I think most employers would say that these plan changes are not producing savings. These changes are helping employers manage health care costs a little better, but the rate of increases is not sustainable for many companies.

      I hear from some employers who support switching to a single payer system.  What do you hear?

      • J__o__h__n

        Thanks for the response.  I don’t know why businesses wouldn’t want to remove themselves from having to provide health care.  The increased taxes they might face to pay for it couldn’t rise at the same rate health care costs have. 

  • Circusmcgurkus

    So, here it is: untried ways to reduce costs
    (a) include EVERYONE at the table – acupuncturists, herbalists, biomechanical experts, chiropractors, experienced yoga practitioners, pilates instructors, EVERYONE and give people the choice of trying the least invasive opportunities first,
    (b) if we cannot eliminate insurance companies and go to single payer (which is a travesty because that it really what we must do) then we need to regulate and control what all the folks in the system are doing from investing in pharmaceutical companies to medical devices – that must be eliminated.  Either one is a medical provider or one is a business consultant, but not both,
    (c) require all participants from insurance providers to patients to doctors to other personnel to be responsible players in this – we really are all in this together.  Do we really need that pill?  Maybe, but maybe not.  Do we really need that surgery?  Maybe, but maybe not.  Let’s stop doing the most expensive reimbursement first and try other methods; justify our actions and inactions,
    (d) cap salaries.  Sorry, guys, if everyone has to pay in then everyone gets to comment.  There is NO WAY that insurance executives or certain physicians “earn” hundreds of thousands of dollars for what they do.  You do not get into a service-oriented avocation in order to fleece the most vulnerable and get rich.  We need to be honest about what we do and who we are from billing to advice.

    As to Susan Davis – there is the saddest comment of all, “As a provider for many insurance companies…”  Really?  A provider for insurance companies?  Or a provider for patients in need of care?  Where is the loyalty – to the Hippocratic Oath or to the Hypocrisy Oath?

    The system is broken – throw the baby out with the bathwater and start over.  Doctors, lawyers, bankers, politicians – we are service providers first and foremost with ethical and moral obligations that take precedence over the BMW in the driveway.  Services are essential to ordered liberty but are not economic engines so we really need to stop sucking all the money from the economy and start contributing to the greater good.

  • Josef617

    I had emergency open-heart surgery in July that required a week in the ICU and 8 weeks of recuperation.  The bill for the first 40 hours in the hospital – before surgery – was $202,000 (I posted it to facebook – I was shocked).   Despite what I thought was strong coverage – which I’m grateful to have – the copays, deductible (which the insurance company confusingly calls “co-insurance”) and uncovered items (not to mention the time off work) have cost us thousands of dollars.
    I was in the hospital for 11 days.  The first 40 hours cost $202,000.  I can’t imagine what the rest of the stay will cost.   This is just not sustainable.

  • donna

    My husband and I are self-employed; we pay for our insurance – upwards of $15-$16K a year for us and our two daughters. AND, we have a minimum co-pay to hit before our insurance kicks in. While I understand the idea of paying more for “expensive” hospitals, I have trouble reconciling this with my situation:

    Diagnosed with cancer at 18, all of my care – surgeries, treatment, and follow-up care years later (29 years later!) – has taken place at Children’s, DFCI, and BWH. I can’t switch to less expensive hospitals. Not only is my history with these hospitals, all of my records and primary care take place at BWH, with follow-up care happening at the Lance Armstrong Clinic for adult survivors at DFCI.

    What is the effect going to be of people switching to other hospitals/physicians? It’s very difficult to find a new primary physician in this state as is; how much time will it take me to find a different cancer center who will 1. accept new patients, and 2. have the same standard of care as DFCI and the LAF? How far will I have to travel?

    Why is healthcare considered a commodity and product, with the illusion of ‘choice’ given to consumers? Shopping by price for handbags is a choice; shopping by price for healthcare shouldn’t have to be.

  • Info

    Just about everyone recognizes that economic disparities in opportunity and outcome are a growing problem in our country. Health Care costs need to be addressed, but I hope we don’t adopt a system that exacerbates disparities in the availability of health care while doing so.

    Health care is a human right, not a luxury consumer service. Any attempt to narrow the accessibility of care on the basis of saving money needs to consider this. That’s not to say it can’t be done, but it has to be done right. Maybe expensive hospitals can be induced to lower their prices if potential “customers” are steered away. Or, maybe we will see the creation of a two-tiered system: state-of-the-art facilities with the best personnel to cater to the rich, and poorly equipped and staffed hospitals and clinics for those who can’t afford thousands of dollars in out-of-pocket payments.

    If we are really serious about healthcare reform, though, we need to move toward a more efficient, streamlined and transparent universal healthcare system. Such a system might help to cut out some of the problems of the current status quo: administrative bloat, profit motives and perverse economic incentives of various kinds.

  • Anne DiNoto

    Yes, I’m trying to figure out how tiered network plans work!  I want to know how the tiers are set up and how I’m supposed to “do my homework” with the insurance plans as Sandy Reynolds with AIM suggested.  Where am I supposed to get this information? All I got from my employer is the generic benefits summary.  If I’m being charged more money to pick a particular doctor I want to understand why it’s higher cost.  My tiered network is based on the primary care doctor I chose.  Meaning if I choose a PCP in the more expensive tier, then I pay higher co-pays. I’d also like to know why the tiered plans are based on PCP choice.  My situation is similar to the one mentioned on Lahey Clinic–My employer is affiliated with a medical center, so it’s that particular medical center that is in the less expensive tier. I only had a couple of weeks to choose a plan during open enrollment. I was devastated when I realized my PCP of the past 13 years wasn’t in the new tiering network. This is going to cost me an extra $1000 in copay expense this year to keep my same doctor. I just didn’t think I had enough time or information to switch doctors. Even with extra time, I don’t know how to figure out the tiers.

  • Dennis Byron

    the following is interesting in two dimensions:

    “Howard Grant, the CEO at Lahey Health System in Burlington, says he had many disgruntled employees during the company’s first year with tiered coverage. Grant says he reminded employees who complained about tiered coverage that Lahey wasn’t cutting their choices, just asking them to pay more to use a more expensive hospital. But we also reminded our employees that we were spending $66 million a year on health insurance, increasing at 10-15 percent clips every a year,” Grant said. “Our ability to sustain fair compensation for our workforce, and our ability to continue to support a very generous pension plan and all the other benefits were in large part dependent on our ability to control what was the only component of our cost structure that we hadn’t been able to manage, historically, very well.”

    1. What tier is Lahey in in his own plan? (I am assuming — maybe incorrectly — that Lahey Health Systems has something to do with Lahey Clinic?)
    2. Lahey illustrates exactly how the base rate propaganda from the state healthcare wonks is so misleading. Average base rate incrases last year according to the story were 4%-10%. That translates to 10% to 15% in the real world

  • DS

    I can appreciate the need for change in healthcare, a closer look at costs and it being a collaborative effort between consumers, hospitals and insurance companies, but I am extremely concerned of the disparities this will create.  There is the obvious case of affordability and socioeconomic class, but has there been consideration given regarding, only options for care are in the bigger Boston Hospitals.  Smaller hospitals may not have the specialists needed to recieve safe care.  For instance, a neurosurgeon, plastic surgeon.  An MD with the knowledge and resources to care for an MS patient.

     If patients in need of these specialized services are now needing to choose between healthcare or a roof over thier heads, you have just set us back decades.  This picture is one that you see in third world countries, where if you have the money to pay for the antibiotic and or treatment you will get it, and you can get it while lying in a clean bed.  If you do not, then you sit on the curb with hundreds of others, suffering and may not get the care needed or if you do, it is not by someone who truly has the knowledge to do so.

    I am extremely concerned about the hand that is being forced for many with special needs.
    There will not be a choice for some.

    Please tell me what have insurance companies done to reduce costs?  I have yet to hear of what they have done, looking within their own systems to help reduce costs.   I work in healthcare.  I work in a Boston hospital.  I have seen first hand, frequently, delays in care for patients, delays in transfer to less acute settings, less costly settings and denial of services to patients that are essential to keep patients safe.  These delays are extremely costly in the immediate future to patients, (extended stays in the acute care hospital setting, while trying to reach insurance medical directors to be met with unanswered calls), extremely costly for some of these patients in the future, as delays in rehabilitation can lead to delayed recovery or even a less degree of what the full recovery will be.  These delays are costly to hospitals as there is endless amounts of resources being used to get the patient what is needed.

    Please tell me what have they done aside from raising cost, reducing reimbursement to organizations, and now forcing the hand of the consumer. 

    Of course they are going to see savings.  Many cant afford the third tier.

  • c potter

    Blue Shield raised our rates 11.9% to “keep pace with expected medical costs in 2013″ You state the “new state law that says health care costs aren’t supposed to rise any faster than growth in the state’s economy overall?”

    California Budget Forecast for 2013-
    “The 2012–13 budget assumed a year–end reserve of $948 million. Our forecast now projects the General Fund ending 2012–13 with a $943 million deficit, due to the net impact of (1) $625 million of lower revenues in 2011–12 and 2012–13 combined, (2) $2.7 billion in higher expenditures (including $1.8 billion in lower–than–budgeted savings related to the dissolution of redevelopment agencies), and (3) an assumed $1.4 billion positive adjustment in the 2010–11 ending budgetary fund balance. We also expect that the state faces a $936 million operating deficit under current policies in 2013–14. These estimates mean that the new Legislature and the Governor will need to address a $1.9 billion budget problem in order to pass a balanced budget by June 2013 for the next fiscal year”.-Legislative Budget Office.

    What am I missing?

    • Martha Bebinger

      Hi C Potter – do you live in CA? The state law I refer to here is in Massachusetts. But here in MA too, it does not look like insurers and providers will meet the goal for 2013 of keeping cost increases, overall, in line with the Gross State Product. The goal is MA for 2013 is 3.6%.

Most Popular