For more than a decade, health insurance costs have increased for both individuals and groups at a rate deemed unsustainable by health care industry professionals.
The Greater Houston area and Texas are not immune: The 13 carriers offered throughout the state through the national health insurance marketplace are proposing 2017 rate increases as high as 60 percent.
Employers, including those in Sugar Land and Missouri City, are shifting more costs to employees as plans are required to include more coverage options, said William Short, CEO of national human resources firm, Ameriflex.
“Employers are going to have to become and are becoming very creative,” he said.
Fort Bend ISD, the largest employer in Fort Bend County, incurred a $6.2 million deficit from health care expenses from July 2015 to June 2016. As a result, FBISD Chief Financial Officer Steven Bassett said the school district made changes to its employee plan options for the 2016-17 coverage year.
“We want our employees to be better consumers of health care,” he said. “If they have a bigger stake in the game, we hope they make decisions that can impact the plan.”
Health care and insurance industry professionals attribute the increases to myriad factors but acknowledge some core issues: federal regulations that require employers to cover more than before, more cumbersome insurance plans and rising medical service costs.
Fewer options offered by the marketplace statewide will further reduce what experts say is a lack of competitive pricing by hospitals and insurance carriers.
To manage consumer costs, experts like Joel White, president of the Council for Affordable Health Coverage in Washington, D.C., advocate 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 smart policy makers, smart politicians will start trying to drive costs down.”
Cost of care
Nearly 140 million people—roughly 43 percent of the U.S. population—receive insurance from employers, William Short said. Most people find this more cost-effective than going through the exchange for insurance, said Marah Short, associate director of the Center for Health and Biosciences at Rice University’s Baker Institute for Public Policy and unrelated to William Short.
“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 providers staying in the exchange, Blue Cross Blue Shield cited a potential premium increase of 60 percent on the exchange in 2017, saying the company lost $770 million in the marketplace during 2015. Humana will also offer a plan but is reported to have a premium increase of 45 percent, according to healthinsurance.org.
Blue Cross Blue Shield also stopped offering a preferred provider organization plan, or PPO, on the exchange, in 2016. Only two PPOs remain available on the exchange in Houston, and the rest are more costly health maintenance organization, or HMO plans, said Travis Middleton Jr., president of TradeMark Insurance Agency in Houston.
Marah Short said the sticker shock of insuring more people was likely a reason some carriers pulled out of the insurance exchange.
“We do have people on insurance who hadn’t had it before, maybe they had pre-existing conditions or had some kind of chronic condition,” she said.
At CHI St. Luke’s Health-Sugar Land Hospital, CFO Bill Beauchamp said increased access to insurance is not what is driving more patients to the hospital; rather, it is caused by the county’s growing population. Yet, he said CHI St. Luke’s Health doctors may lose patients to other hospitals because insurance plans refer patients elsewhere.
“They may be losing out on the opportunity on cases just because insurance [companies] have contracts with certain providers at certain rates,” he said.
Looking at operations, Beauchamp said increasing insurance and pharmaceutical costs creates a “trickle-down” effect, giving patients a bigger bill.
“From a hospital side, we have to go out there and try to collect from the individual after the insurance pays,” he said. “And these high-deductible plans make it difficult for people to pay.”
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.
Following that trend is FBISD, which increased its deductibles for 2017. The school district also switched from Cigna to United Healthcare and eliminated out-of-network costs.
Bassett said the latter company has a larger network of providers from which to choose. He also said FBISD negotiated different prescription prices. A $100 per month surcharge for spouses who can get insurance through their own employers was added.
FBISD is incentivizing its nearly 10,000 employees to join United Healthcare’s charter plan with Kelsey-Seybold Clinic, which gives access to the health system’s physicians.
“I think that will have a material impact,” Bassett said.
Of the nearly 500 employees at CHI St. Luke’s Health-Sugar Land Hospital, Beauchamp said about 325 are on the hospital’s health plan. Coverage options have not been dropped, but the organization does offer a range of plans for staff, including a high deductible plan.
He also said employees have the option of a health savings account or flex spending account to take out money before taxes for health costs.
Trimming the fat
The upward trend of health insurance costs shows no signs of stopping, but industry professionals said remedies are available. Improving medical efficiencies and informing patients are recommended as well as policy changes from the nation’s capital, White said.
He and Terry Wheeler, CEO of Cypress Fairbanks Medical Center Hospital, said competition should be more fierce among hospitals and insurance carriers in order to drive down costs.
“If you only had the choice of three banks or four banks [for example], 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 make more informed decision 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.
“It is becoming a popular option because health care systems with traditional insurers are very fragmented,” Styf said. “Our system enables the insurer and health care delivery system to align their interests to the same side.”
Styf said collaboration between care and insurance allows the hospital system to reduce costs. He said this varies from other care systems, which often battle insurance providers to approve individual visits to emergency rooms. This can be more costly and inefficient.
Employees are also using HSAs, health reimbursement arrangements and indemnity plans to offset deductibles, according to William Short and the Kaiser Family Foundation.
Employer-sponsored wellness programs reduce costs, but overall, experts suggest individuals research and use tools to compare prices. Beauchamp said his hospital has offered a wellness program for three years, and participation is high.
“I think more and more employees are signing up for that,” he said.
