CRITICAL CONDITION?

Insurance premiums ailing industry

By Sean Ryan

Health insurance prices are going to go up in 2003.

With that as a given, it will be up to insurance providers, governments, employers and labor groups to fire up a collaborative game of give-and-take to find a way to stop the bleeding.

"There's no reason to think the rate increases we've been seeing over the past few years would ease up," said Eileen Mallow, state assistant deputy insurance commissioner. "Since it didn't appear overnight, it's not going to be resolved quickly either. Without really broad appeal to provider groups, insurance and employers and employees, whatever solution that comes out won't be implemented."

The Office of the Commissioner of Insurance averages that for a Milwaukee business with 25 employees, insurance rates increased 7 percent in 2000 and 21 percent in 2001.

Industry observers site a host of reasons for these increases, stemming from health-care consumption to hospital management to underfunded public programs. The most commonly referenced causes include patients purchasing unnecessary treatment, an increasing elderly population, lack of health-care pricing information, excessive construction by providers and inadequate Medicare and Medicaid reimbursements to providers.

And the rates will continue to rise until a solution surfaces, said Bill G. Smith, state director of the National Federation of Independent Business Wisconsin Chapter. Companies are faced with three options to deal with 2003's growing costs: increase employee's payments, reduce coverage or shoulder the cost increase, he said.

"We've gone not just from a crisis in the cost of coverage, but to a crisis in coverage," Smith said. "Employers are reducing benefits. We're seeing more of them shift more of the cost to their employees."

Less than critical

Tammy Myers, human resources manager for Ed Altmann Construction Co. in Wisconsin Rapids, said that while the insurance costs are a drain, they aren't critical enough to warrant any big company changes. Basically, to maintain the same level of coverage, the company must spend a chunk of money that it could otherwise spend growing the company.

"It's money we'd rather buy another piece of equipment with," Myers said. "There's so many other things you could spend it on. It has to come out of somewhere."

At Suburban Electric in Appleton, rates will likely grow between 10 percent and 20 percent when coverage is renewed in February, said Elly Huering, company spokeswoman. The company, like Altmann, is prepared to absorb the increase in February without increasing employee payments or decreasing coverage. Then it will wait and see what happens next.

"It's a necessary evil," she said. "With something like that we take a wait-and-see attitude. It's not directly impacting our ability to bid jobs."

First steps

"Everybody knows they're going to have a piece of the problem, and everybody's going to have to do their part to fix it." Eric Borgerding Senior Vice President Wisconsin Health and Hospital Association

It seems that Suburban, and contractors in general, will have a long wait, since the search for a collaborative solution is just now beginning. Mallow said the only reform plan she's seen put forward is from the Wisconsin State AFL-CIO, but it received criticism from both the OCI and the Wisconsin Health and Hospital Association.

The insurance commissioner and WHA are organizing data to offer in a roundtable discussion between government and business groups, which WHA Senior Vice President Eric Borgerding said he would try to organize next spring. The state has compiled comments and suggested solutions from public hearing sessions held last summer, and WHA has spent the last half year developing a proposal of its own.

"We've spent the last five or six months developing a proposal that we can share with and work with different groups, particularly business groups," Borgerding said. "We'll sit down and put together a legislative and nonlegislative thing. It'll be sort of our best shot."

Borgerding said Wisconsin Manufacturers and Commerce and the NFIB would definitely be in the talks, and he invited input from the AFL-CIO. He also welcomed the construction industry associations that worked alongside him to lobby against a hospital construction moratorium last spring.

"The construction industry has a key role to play," Borgerding said. "The industry has been an important voice when it comes to communicating the impact that notions like construction bans will have, not only on the health-care industry, but on all industry in general."

Cooperate...or else

Although their ideas about the increases' causes and solutions run the gamut, AFL-CIO President David Newby, Borgerding, Smith and Mallow all said there was a strong feeling of unity against the problem that can help carry the discussion along. That, and a growing sense of urgency, would help bring together parties that often sit on opposite sides of the table, Newby said.

"There's just a sort of sense that, 'Hey, we have a crisis,'" he said. "I think, ultimately, it's in everybody's interest to solve the problem. It can't take a long time because the system is simply going to crumble. After two more years of the premium increases like we've seen over the past few years, how many more people will be uninsured?"

Here is a rundown of the target areas that Borgerding, Smith, Mallow and Newby said should be changed to stop the rate increases:

• Borgerding said that hospitals are constantly raising their bills because half of their business comes from Medicaid and Medicare, which only pay 65 percent and 81 percent, respectively, for the cost of treatment. He said those percentages would need to go up or hospitals will continue to make up the difference by raising private sector fees.
  
  
• Smith agreed with Borgerding that the state would need to reimburse hospitals more for treating Medicaid and Health Insurance Risk-Sharing Pool patients. Also, he said some plan should be implemented to make consumers more cost-conscious and increase consumerism in the industry when choosing health-care providers. Borgerding said WHA is compiling price information from its members to disseminate among consumers.
  
  
• Mallow favors a broader approach that would encourage restraint, but not prohibition, of health-care construction, consumer restraint to curb unnecessary treatment and restraints on providers' fees. She said there were no solid answers on how to achieve these, but she hopes some would come out of next year's discussions.
  
  
• The AFL-CIO plan would charge employers a fee for each employee to fund a health insurance plan to cover all Wisconsin employees and their dependents. The state would create a commission of private industry leaders to set employers' fee rates and administrate the program.

Dead moritorium?

"We've gone not just from a crisis in the cost of coverage, but to a crisis in coverage." Bill G. Smith State Director National Federation of Independent Business

Last year's legislative proposal to control hospital costs by banning construction of new hospitals wasn't favored by Mallow, Smith, Borgerding or Newby, but Mallow and Smith said something could be gained by setting stricter standards for building.

"I saw something talking about $1 billion in new hospital construction in southeast Wisconsin," Mallow said. "Somebody's got to pay for that. But an outright moritorium is probably not the answer."

Mallow said the best solution could be more self-control from hospitals without a government plan to force building restraint.
"Most community hospitals have a board that includes larger employers from the community," she said. "They can certainly say no to new building programs."

Any attempt to stop rate increases or the factors that drive prices up would be complicated and would approach the issue from a number of fronts, Borgerding said. The groups would have to cooperate, and they'd need to make sacrifices, to reach a solution that would help the overall state.

"Everybody knows they're going to have a piece of the problem, and everybody's going to have to do their part to fix it," he said.

"First and foremost we need to shed some light in a nonfinger-pointing way as to the true nature of the problem. We can't keep wasting our time on hospital construction bans."

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