It’s decision time for Orange County employers.
Facing double-digit increases in health insurance premiums next year, businesses across the county are weighing whether to absorb the hikes or pass all or part of them on to workers. Smaller employers might even be considering dropping coverage altogether.
To cope, some businesses are offering incentives to employees to join pre-screened, cost-effective plans. Still others are turning to insurance brokers to make sure they’re getting the best deal.
“We’re on the upward trend, unfortunately,” said Barbara Decker, manager of benefits for Rosemead-based Southern California Edison, which counts 2,200-plus Orange County workers. The utility’s medical plan costs are expected to go up 10% across the board next year, Decker said.
Like many employers, Edison provides a contribution toward health premiums, while employees pay the rest, Decker said. The ratio is 90% of the premium for a single employee and 80% for dependents.
Depending on the company and insurer, OC businesses could be paying as much as 20% more next year to provide health benefits for workers. The reasons: higher drug prices, improved medical technologies and investor pressure on carriers to produce better financial results. Hospitals and doctors also are seeking higher payments for their services from health maintenance organizations and other insurers.
These trends are playing out in OC in the contractual crackup between a dozen insurers and Orange-based St. Joseph Health System, and the trouble at Anaheim’s KPC Medical Management Inc., which filed for bankruptcy protection last week.
In a bid to contain healthcare costs, Edison offers incentives for workers to go into a handful of plans the utility selects for cost and quality of care. Workers can qualify for a “value dividend” of $15 a month for belonging to health plans that rank highest on an internal scorecard, Decker said.
Edison offers HMOs and point-of-service plans that allow workers to choose doctors, albeit at a higher cost. Carriers include Cypress-based PacifiCare of California, Kaiser Permanente, Cigna HealthCare, Blue Shield of California and Health Net.
Fifty-eight percent of Edison’s overall workforce belongs to HMOs, compared with 43% in 1995, Decker said. The shift has been driven by cost factors and Edison’s incentive program, she said.
Healthcare premiums are expected to go up about 7% in 2001 at Beckman Coulter Inc., the Fullerton-based medical diagnostics products maker. The company has been bracing itself for higher costs, said Claudia Ferguson, the company’s director of global benefits.
“We were happy,” Ferguson said. “That’s about what we expected.”
Beckman employs about 2,000 people in Fullerton and Brea and offers both HMO plans and a self-insured plan with Blue Cross of California’s doctor network, Ferguson said. Carriers, including PacifiCare and Blue Cross, came in with reasonable rates during the negotiation process, she said.
Beckman is passing on some of the cost to employees.
“Generally speaking, we pick up 80% to 85% of the (overall) cost of coverage for the employee,” she said. “We pick up 70% of the additional family coverage.”
The PacifiCare-St. Joseph fallout was a factor for Beckman employees during the company’s open enrollment for 2001, Ferguson said. PacifiCare and St. Joseph were unable to reach a contract agreement for 2001 and are dissolving their business relationship (see related item, page 26).
“Close to one-third of our (employee) population in California enrolled in PacifiCare moved to Blue Cross,” Ferguson said.
While Beckman got off relatively easy in California, healthcare premiums for its 1,900 Florida employees went up in the double digits, primarily because of higher rates of healthcare usage by workers there, Ferguson said.
At RiechesBaird, an Irvine advertising, marketing and public relations firm, officials expect healthcare premiums to go up a modest 4% in 2001, according to Lori Kij, the firm’s human resources manager.
“We’re taking it,” Kij said with a laugh when asked what RiechesBaird would do about the rate hike. She said the agency pays 100% of the premium costs for its employees, and described that as a “huge asset” in attracting workers.
The 46-person agency offers workers a point-of-service plan from PacifiCare. Kij said she wasn’t surprised by the relatively small increase. Some observers predict smaller companies would bear the brunt of rising healthcare costs because they don’t have the pull larger employers do.
But RiechesBaird’s workforce is made up mainly of people in their 20s and 30s, which works in its favor with insurers, Kij said.
“We don’t have a lot of major claims. Maybe it’s the nature of our group,” she said.
Health plan representatives’ projections run the gamut. PacifiCare’s HMO premiums for business in OC are set to go up between 10% and 20% next year, said spokeswoman Cheryl Randolph, with smaller groups generally seeing higher increases.
Health Net’s local HMO premiums for business stand to go up between 10% and 15% next year, according to spokesman Brad Kieffer.
Blue Shield plans to raise its OC rates in the double digits, although a spokeswoman declined to give numbers. Health plans that contract with St. Joseph, which has pressed for higher payments, would pass the rate hikes on to employers, she said.
Cigna is projecting premium increases of between 8% and 10% for large groups. Cigna, along with Blue Shield, Blue Cross, Aetna U.S. Healthcare and Health Net, are St. Joseph’s new “partner health plans”,a select group of insurers the health system is contracting with for 2001.
Kaiser Permanente projects its 2001 average across-the-board premium increase in “the high single digits,” said spokeswoman Barbara Shipnuck. Blue Cross expects across-the-board premium increases of approximately 7% in 2001, according to a spokeswoman. n
