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 Katy, 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.

Katy ISD, the largest employer in the Katy area, incurred operating losses from health care expenses in both 2014 and 2015 and is projected to tally a $1.7 million deficit in 2016. As a result, KISD Director of Risk Management Lance Nauman said the school district makes adjustments to its employee coverage plans on an annual basis in an attempt to balance out large loss claims.     

“You have to keep doing this; you have to pay the piper eventually,” Nauman said. “Medical costs continue to rise, and by [tracking medical inflation] and making plan adjustments, you have to try to make people become more conscientious of their health care dollars. That is what school districts and businesses are having to do is people helping take on some of that risk.”

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, Joel White, president of the Council for Affordable Health Coverage in Washington, D.C., recommends 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,” White said. “My sense is smart policymakers, 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. She is 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 Houston Methodist West Hospital, Vice President of Operations Peyton Elliott and Director of Finance Joanne Ouellet said increased access to insurance is not what is driving more patients to the hospital; rather, more people visit the local hospital because of the area’s population growth. Elliott said in order for the hospital to best capitalize on the growth, it must maintain a balance between open and narrowed networks.

“We feel that the hospital is best when people can make an informed decision, and they have a choice in the matter,” he said. “But it is hard to control utilization if you have a completely open network; that’s the heart of the struggle.”

Elliott said the hospital is experiencing a trend of larger out-of-pocket costs for patients with high deductible plans. Ouellet said increasing insurance and pharmaceutical costs create a trickledown effect that gives patients a bigger bill.

“We’re seeing double-digit [percentage] increases in both supply costs [and] drug costs, and it is a double whammy for us,” she said.

Employers take measures

Employer-provided insurance plan deductibles are increasing to keep rising premiums down, according to the Kaiser Family Foundation, a nonprofit that collects health care data.

Following that trend is KISD, which Nauman said has raised deductibles in the past. The district uses its self-funded health care coverage as a recruiting tool as opposed to the Teacher Retirement System, which comes with unpredictable premium increases, he said. The district also contributes $385 per month to all participating employees’ premiums, a number that is significantly higher than the state’s mandatory minimum of $225 per month, he said.

According to Nauman, however, adjustments for 2017 will pass some of the financial responsibility onto KISD’s nearly 6,500 projected participants to compensate for obstacles, such as employee population growth and spousal claim costs being 1.5 times those of employees. KISD’s health care strategies for 2017 include raising premiums by $50 or less per month on some coverage plan tiers, increasing emergency room co-pays and eliminating incentives.

KISD also negotiates for lower prescription prices, he said.

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 decisions 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.

Employees also are using health saving accounts, health reimbursement arrangements and indemnity plans to offset deductibles, according to William Short and the Kaiser Family Foundation.

While employer-sponsored wellness programs reduce costs, experts said individuals should research and use tools to compare prices. Elliott and Ouellet said their hospital has offered free annual wellness screenings for employees for about 10 years and various wellness programs for roughly five years. Participation in both is high, they said.