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 with the 13 carriers offered throughout the state through the national health insurance market place proposing 2017 rate increases as high as 60 percent. Employers 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.
Conroe ISD, one of the largest employers in Montgomery County, budgeted $42.5 million to provide health care coverage to 5,050 employees during fiscal year 2016-17. The figure is a substantial increase in the cost of health insurance per employee—$428 per month—compared to what the district paid in 2009—the year before the Affordable Care Act was enacted—when the district spent $275 per month per employee.
To manage the costs, the district changed its health care coverage plan in 2015. However, CISD Chief Financial Officer Darrin Rice said the district saw a large increase in the cost of prescription drugs between fiscal years 2015 and 2016.
“In 2015-16, we switched to the [accountable care organizations] plan and saw savings on our medical side, but what we ran into trouble with was on the prescription drug piece,” Rice said. “We saw an increase of 43 percent on prescription drug cost.”
Health care and insurance industry professionals attribute the increases in health insurance costs to many 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 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 coverage through 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.
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 on the exchange in 2016. Only two PPOs remain available on the exchange in Houston, and the rest are more costly Health Maintenance Organization 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.
EMPLOYERS TAKE MEASURES
Deductibles on employer-provided insurance plans are increasing to keep rising premiums for employees down, according to the Kaiser Family Foundation, a nonprofit organization that collects data on health care.
The city of Conroe—which employs 562 full-time employees—is considering raising its deductibles in the future, Human Resources Director Andre Houser said. The city has experienced challenges associated with the rising cost of providing health care coverage and has implemented several changes since 2013. Today, the city pays about $2,000 more per employee compared to 2013, he said.
Houser said city employees did not pay anything for employee-only health insurance before January 2013. Since then the city has increased the amount employees pay monthly every year since—and is considering another increase next year—to manage the rising cost of insurance coverage.
He said the city experiences challenges managing the cost of pharmaceuticals and imaging services in particular.
“Sometimes a prescription that someone is getting administered on a daily basis may cost [$1,000-$3,000] per shot,” Houser said. “This really has been going on for 20 or 30 years now, but it has become more acute in the past five or 10 years. It is frustrating to me that you can go to Canada and get the same medicine probably for a tenth of the cost here.”
To manage expenses, the city offers three distinct health insurance plans to employees. It offers a high deductible plan combined with a health savings account, a traditional plan with a $1,000 deductible and coverage through the KelseyCare health benefits plan from Kelsey-Seybold Clinic.
Implemented in January 2015, the KelseyCare plan is the city’s most cost effective option, Houser said. The plan allows employees to receive health care services through any Kelsey-Seybold affiliated doctor or specialist.
Through its Aetna Whole Health plan, CISD offers similar coverage for its employees. The plan allows employees to receive health care from physicians associated with the Memorial Hermann Accountable Care Network and the Aetna Select Network, CISD Benefits Coordinator Tiffany Mattfeld said.
To reduce costs, the plan is the only health insurance plan the district offers, Mattfeld said. The district previously offered a high deductible plan as well, but the district stopped offering the plan during FY 2015-16 as the cost became unsustainable.
The district also added a prescription drug deductible during FY 2016-17 to manage the increased costs. Additionally, employees who request certain brand-name medications now pay an increased co-pay if a generic medication is available.
“We increased those areas significantly because that is where the cost was hitting our plan the most,” Mattfeld said.
Fixing the system
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 Capitol, White said.
He said competition should be fiercer among hospitals and insurance carriers in order to drive down costs. In addition, he said greater transparency from hospitals would help patients make informed decision about procedures.
U.S. Rep. Kevin Brady, R-The Woodlands, said the rising cost of pharmaceuticals also needs to be addressed. Brady—who serves as chairman of the House Ways and Means Subcommittee on Health—said efforts could be taken to reduce the cost and time it takes for new medicines to be developed and increase competition among pharmaceutical companies to reduce the cost to employers and individuals.
“We need to make it easier and quicker for new medicines to become available,” Brady said. “Especially since today, by some estimates, the average cost to bring a new drug to market is almost $2 billion and it takes years and years. I am convinced we can accelerate that time to make it cost less.”
Brady said programs that address the cost of research could also reduce the cost of health insurance.
“I am optimistic that there are a lot of changes that could be made to lower the cost of medicine by lowering the cost of developing them,” he said.
Locally, the Lone Star Family Health Center in Conroe works to reduce the cost of health care through its programs as a federally qualified health center, a community-based organization that provides primary care to residents regardless if they have health insurance.
LSFHC spokesperson Ashley Hamlin said the services provided by FQHCs reduce the cost of health care by $24 billion annually nationwide by using grants to provide affordable health care to uninsured residents. She said more than 90,000 Montgomery County residents do not have health insurance.
“Those patients often don’t go to the doctor for regular visits, so they end up in the [emergency room],” Hamlin said. “Long term it ends up costing the health care system as a whole.”
