For more than a decade, health insurance costs across the U.S. have increased for individuals and groups at a rate deemed unsustainable by health care industry professionals.
The Greater Houston area and Texas have not been immune. Each of the 13 insurance carriers accessible in the state through the national health insurance marketplace are proposing rate increases up to 60 percent for 2017.
Health care and insurance industry professionals attribute premium increases to myriad factors but cite several core issues: federal regulations that require employers to provide more coverage, more cumbersome insurance plans and rising medical service costs.
“I expect that there is some growth in premiums just because of the different items insurers are required to cover, such as preventive care [and] annual care.” said Marah Short, the associate director of the Center for Health and Biosciences at Rice University’s Baker Institute for Public Policy.
She said the cost of health care is growing faster than the economy itself.
Several insurance providers— including United Healthcare, Aetna and Scott & White—left the marketplace in Texas in 2016 due to rising costs. Fewer marketplace options could stifle competition, leading to even higher prices among hospitals and insurance carriers, said Joel White, president of the Council for Affordable Health Coverage.
To manage costs, White advocates individuals stay informed of their options. He speculated if the situation remains unchanged, the average American family could be spending half its income on health care by 2030.
“This is [a] serious problem that is impacting people at a very real level,” he said. “My sense is [that] smart policy makers, smart politicians will start trying to drive costs down.”
Drop in competition
Nearly 140 million people—roughly 43 percent of the U.S. population—receive insurance from employers, according to national human resources firm Ameriflex. Most people find this more cost-effective than going through the exchange for insurance, Short said.
“Whenever you move to the exchange, you don’t get anything subsidized because your employer and employee are both paying for it,” she said.
Among the 13 insurance carriers staying in the exchange, several are projecting major premium increases in 2017. Blue Cross Blue Shield could be increasing premiums by as much as 60 percent. Officials reported losses of $770 million on the 2015 marketplace.
Meanwhile, Humana could increase premiums by as much as 45 percent, according to healthinsurance.org, an independent informational website about health care insurance.
Blue Cross Blue Shield also stopped offering a preferred provider organization plan, or PPO, in 2016. Only two PPO options are available on the exchange in Houston. The remaining plans fall into the more costly health maintenance organization, or HMO, category, said Travis Middleton Jr., president of TradeMark Insurance Agency in Houston.
Short said the sticker shock of insuring more people is likely a reason some carriers pulled out of the exchange
“We do have people on insurance who hadn’t had it before [who] maybe had pre-existing conditions or some kind of chronic condition,” she said.
Ken Janda, president and CEO of Community Health Choice, a nonprofit health plan available in the Greater Houston area, said the longer people are insured, the lower insurance costs will be for everyone.
“We believe that, long-term, someone who has been insured for 10 or 15 years and has had more preventive care services will save us money,” Janda said. “The main drivers of the increasing cost in the marketplace [is] the people that we actually signed up have turned out to be older and sicker than we thought they would be.”
Employers take measures
Deductibles on employer-provided insurance plans are increasing to keep employees’ rising premiums down, according to the Kaiser Family Foundation, a nonprofit that collects data on health care.
Mark Park owns AAA Plumbers, which services northwest Harris County with clients in Cy-Fair. He has 68 employees and said the company has always provided full medical coverage for its employees.
He said AAA Plumbers employees are receiving less coverage with higher deductibles and premiums.
“In the last three years alone, our medical insurance premiums have increased over $80,000,” he said. “It’s nearly impossible to pass that kind of increase along to customers.”
He said the company has been advised by insurance agents to require employees to start paying a portion of their insurance.
“I am not sure we can continue to absorb the increase in premiums year after year,” Park said.
Cy-Fair ISD, the largest employer in the Cy-Fair area, provides health insurance to district employees through Teacher Retirement System-Active Care, a statewide program for school districts, charter schools and regional educational service center employees.
The district switched from being self-funded to using TRS in 2011, when premiums started rising at unsustainable rates. The switch allowed CFISD to reduce its costs by $20 million over the years, said Karen Smith, the district’s associate superintendent of business and financial services.
Under TRS, the state is required to contribute $75 per month per employee, and the district is required to contribute $150 per month toward each employee’s health costs. Employees are responsible for covering premium increases.
Smith said CFISD, like other districts, has seen an average premium increase of 5.4 percent in each of the past three years. In CFISD, approximately 43 percent of employees opt out of coverage through the district, allowing the district to supplement premium increases with slightly higher raises when the budget permits, Smith said.
Trimming the fat
The rising cost of health insurance shows no signs of stopping, but industry professionals said there are ways to provide some relief.
White and Terry Wheeler, CEO of Cypress Fairbanks Medical Center Hospital, said competition needs to be more robust among hospitals and insurance carriers in order to drive costs down.
“If you only had the choice of three banks or four banks, there would be fewer and fewer options and you would have higher interest rates,” Wheeler said.
In addition, White and Middleton said greater transparency from hospitals and carriers would help patients be more informed about procedures.
Memorial Hermann is the only Houston hospital system that offers its own insurance plan. Dan Styf, the CEO of the Memorial Hermann Health Plan, said the plan only covers 70,000 individuals now but has grown significantly.
“Our system enables the insurer and health care delivery system to align their interests to the same side,” he said.
Styf said collaboration between health care and insurance allows the hospital system to reduce costs. He said this varies from other systems, which often battle insurance providers to approve visits to emergency rooms.
Employer-sponsored wellness programs can also be used to reduce costs.
Short suggested anyone with access to a wellness program or added benefits, including gym membership or resources, take advantage of them.
“Some smaller employers can’t afford [wellness programs], but it is a definite perk for the employer and employee,” she said.
