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Tuesday, July 09, 2002
Copyright © Las Vegas Review-Journal

Health insurers warn of increases

Insurance industry executives are warning Nevada employers to brace for double-digit increases in health insurance premiums next year.

A lot of the higher costs will be somewhat invisible to workers, though.

"Most of the employers will pick up most of the price increases," Jon Bunker, president of Sierra Health Service's Managed Care Division, said.

Sierra Health Services, the largest health insurance company in Nevada, anticipates premiums will climb between 9 percent and 20 percent, depending on the kind of health insurance product.

Nevada Care, the state's second largest HMO, hopes to keep its price increases below the 17 percent national average increase being predicted by Seattle-based employee benefits consultant Milliman USA.

The rate of inflation last year was 2.8 percent.

"We're not seeing that type of an increase necessary across the board," said Todd Meek, Nevada Care chief executive.

"Things seem to have settled down. We're doing our best to hold the line and not have these significant double-digit increases," Meek said.

Although Bunker said many employers won't raise workers' premiums, many will raise employees' health care costs by increasing patient co-payments for prescription drugs, doctors or hospitalization.

Health insurance prices are rising faster in Nevada and other Western states -- Arizona, Colorado, Idaho, Montana, New Mexico, Utah and Wyoming -- mainly because doctors and hospitals are increasing the rates they charge HMOs to treat plan members, said Steve Cigich, who is surveying HMOs for Milliplan USA.

"We've been seeing double-digit (increase) numbers for at least a year," said Guy Perkins, chief examiner for the life and health section of the state Insurance Division.

Perkins noted that a PriceWaterhouse Coopers study for the American Association of Health Plans is predicting an average 13.7 percent increase nationally in medical insurance costs.

The prescription drug component is rising 35 percent to 40 percent this year for health insurance, a trend that will continue next year, said Jimmy Pettyjohn Jr., president of a consultant company for self-funded plans.

Perkins said even though the state doesn't regulate self-insured or self-funded plans of some large employers, he has noticed that they don't appear to be insulated from the increases.

"I keep hearing that these plans, as well, are experiencing double-digit inflationary costs," Perkins said. "It's really right across the board."

Pettyjohn, however, said self-insured employers are able to hold down costs by "unbundling" services and buying them from separate providers.

Self-insured groups include the state, Clark County and large casino operators, such as MGM Mirage, Park Place Entertainment and Station Casinos, he said.

At Sierra Health, the percentage of increase will vary, depending on the particular program a company uses.

Health maintenance organization (HMO) or managed health care plans are generally least costly and most restrictive. HMO plans will face premium increases ranging from 9 percent to 12 percent, Bunker said.

At the other end of the scale, premiums for preferred provider organization (PPO) insurance will increase 16 percent to 20 percent. PPOs allow the patient complete freedom of choice.

A popular alternative, the point of service plans will have premium increases in the 12 percent to 15 percent range, Bunker said. Patients who have point-of-service plans start with an HMO but can opt out and obtain health care services from a non-HMO doctor.

Employers typically offer one or two but not all three alternatives to workers, Bunker said.

Insurance executives say there are several factors affecting health care costs.

One is the rising price that doctors must pay for medical malpractice insurance.

Doctors "are certainly looking to increase their revenue to offset malpractice insurance (costs)," Meek said.

"Payers are just starting to feel that (price) pressure that (health care) providers are putting on them because of the rising cost of malpractice insurance," Bunker said.

"On top of that, we've got a shortage of nurses in Southern Nevada as well," Meek said.

Las Vegas also faces a shortage of hospital beds, which is causing hospital prices to increase. "Our local facilities are struggling to accommodate the growth," Meek said.

"These costs are passed on certainly to health plans, which are passing them on to employee groups," Meek said.

"There are several new hospitals slated to be completed in two to three years" and that should help contain hospitalization costs, Bunker said.

In addition, pharmaceutical drug prices are rising, partly because of advertising that increases patient demand for high-priced brand names, Bunker said.

"We're a consumer driven society," Meek said. "We see something in Time magazine and we want that name brand drug whether it's appropriate or not."

Sierra is managing cost increases better than some because of its large size and purchasing power, Bunker said. Sierra serves casinos, cities, banks and small businesses, he said.

Meek said Nevada Care has been successful in reducing costs both administratively and through better management of health care services.

"Our goal at the end of the day is not to be facing these continuing large increases," Meek said.

Knight Ridder Newspapers contributed to this report.