Health insurance premiums squeeze employers, workers

Published June 4, 2004

By Jonathan Maze, Charleston Post & Courier

Stephen Weinger spent 90 minutes Thursday with his health insurance agent in what has become a painful annual event: He found out that premiums for employees at his Charleston-based catering and event-planning company will rise again next year, 16 percent this time.

Like a lot of employers, Weinger is tired of hearing these numbers. But he’s also tired of cutting back on benefits, which he’s done for the past few years at the company he owns, Stephen Duvall Catering and Events.

So he’s considering a different approach this time. “We’ve reached the limit on this,” said Weinger. “We need to have a product that works for us.

“(This time), we’re just eating it.”

In other words, this year, the people who work for Weinger won’t be asked to pay more. The business will absorb the hit, in part to satisfy his employees’ desire for better benefits and so that he can stay competitive.

Weinger is hardly alone. Health insurance premiums are expected to rise 13.7 percent next year, according to a study released Thursday by Illinois-based benefits consultant Hewitt Associates.

In a sign of how high health care inflation has been, that’s actually considered good news, evidence that year-to-year premium increases may be slowing.

Last year, Hewitt’s study of 160 large employers around the country found preliminary increases of 18 percent. After negotiations with insurers and cuts made to health plans, the increases turned out to be 13 percent.

Charleston-area benefits experts say they’ve seen a similar slowing in premium increases, and BlueCross and BlueShield of South Carolina has said increases next year are expected to be 30 percent lower than they were a year ago.

Nevertheless, an increase is an increase, and none of this is considered good news to employers like Weinger. Many say yet another increase will make health insurance less affordable than ever.

While the Hewitt survey looked at big employers, small companies have been hit particularly hard.

“How in the world we could consider another double-digit increase in health insurance anything but a bad thing is beyond me,” said Frank Knapp, director of the S.C. Small Business Chamber of Commerce. “It’s not any reason for people to jump up and cheer. The ship is sinking.”

Since the decline of managed care in the late 1990s, costs for health insurance have surged, in part because of the aging of the population, a growing obesity problem, mounting drug costs and the rising use of technology.

To offset these increases, many companies have signed up for health plans that reduce benefits while passing more of the cost to workers through higher deductibles and co-payments.

According to the Hewitt study, 52 percent of companies in 2001 said their plans required a $5 co-payment for generic drugs, while 27 percent required a $10 co-payment. This year, 5 percent require a $15 co-pay where none did four years ago.

Likewise, more companies are asking employees to pay extra for doctor visits. In 2003, 9 percent of companies required a $20 co-pay for a visit to the doctor’s office. This year, 16 percent of companies oblige their workers to make a $20 co-pay.

“A lot of employers have adopted much higher cost-sharing provisions,” said Brandon Guest, president and CEO of the Horne/Guest Insurance Agency, based in Mount Pleasant. “That’s going to translate, in my opinion, into a more cost-conscious consumer.”

Newer benefit plans also end up costing sicker people more money because they use the health system more often.

“As long as the plan still maintains co-pays, the average consumer can still get a checkup or get a prescription,” said Lynne Bernthal, owner of West Ashley benefit consulting firm Benefit Concepts. “What is really happening is the heavy user, the chronically ill, are paying more and more out of their pocket. I’m not saying it’s right, but when you’re dealing with the costs we’re dealing with, that’s what happens.”

Alan Epley, chief executive of Columbia-based Southern Glass and Plastics, said he feels that health insurance is nearly as important to workers as their paychecks.

“We’re a medium-sized business. It’s a privately owned company. We know all the employees and their families,” said Epley, who lives in Charleston. “We care, and we feel like we want to help provide for catastrophes.”

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