Two consulting firms are indicating health plan rate increases will be between 8.4% and 9.9% in 2006. While this is somewhat lower than increases in recent years, the impact will be felt by both employers and employees, who can expect to pay more for their share of the premium than they did this year. And, the premium increases do not reflect the increased costs borne by employees due to higher deductibles and co-pays.
According to Hewitt, employees will receive an average wage increase of 3.6%; for those making $40,000 annually, 23% of that increase will go to pay their increased premiums. On average, employees will be paying $1,612 towards their health insurance costs. Out-of-pocket costs also will increase as deductibles and co-pays rise, making the average employee’s total expenditures in 2006 a record high $3,136. This is 12% higher than 2005.
Interestingly, PPOs will see the lowest percentage increase amongst plan types. According to Insurance Journal’s report on the Hewitt Study;
“On average, Hewitt forecasts that companies will experience 2006 cost increases of 9.5 percent for preferred provider organizations (PPOs), 10 percent for health maintenance organization plans (HMOs), and 10.5 percent for both traditional indemnity and point-of-service (POS) plans.
That means, from 2005 to 2006, the average cost per person for major companies will increase from $7,048 to $7,752 for HMOs; $7,374 to $8,075 for PPOs; $7,322 to $8,091 for indemnity plans; and $7,849 to $8,673 for POS plans.”
Hewitt also noted that many of the companies they are working with that have implemented consumer-directed health plans have seen flat renewals or even declines.
While this sounds great, remember that many of these plans include an increase in the deductible of from $1000 to $5000. Clearly, benefit design can and does have a major impact on renewal rates; it has for fifty years and the onset of these so-called “innovative” plans simply reinforces that fact.
A survey by Milliman and Robertson indicates that many health plans and insurers are entering the CDHP market; in their annual survey, 93% of respondents who answered the questions regarding CDHPs (not all of the survey respondents did) said they plan to offer an HSA or HRA (health care reimbursement) account program coupled with a high deductible insurance plan.
While that sounds great, only 2.5% of 2005 commercial health premiums are for CDHP programs; respondents expect this to be over 5% in 2006.
What does this mean for you?
Higher premiums, a relatively smaller paycheck, and no help in sight.

It has been a while since the last significant discussion of conversion of the US health care system to a single payer format; that drought has been ended with the introduction of legislation by Sen. Sheila Kuehl D-LA) calling for a single payer to run California’s health care system.
The bill is a “work in progress”; Kuehl expects to introduce a more comprehensive, thorough bill in the next legislative session. In sum, the bill calls for a single payer funded by a tax surcharge to raise the estimated $184 billion required to cover the state’s citizens. Kuehl claims her plan will result in savings of over $8 billion to employers and families.
The plan would be administered by a single entity, but other health plans would be allowed to offer supplemental coverage.
The chances that this will ever see the light of day? None.
But kudos to the Senator for advancing a radical idea. While other governments and planners tweak around the edges, she has put forth a reasonable alternative, one that may help push the dialogue forward.
What does this mean for you?
A stalking horse or straw-man, your choice.

Steve Case’s Revolution Health has announced its first investments in the health care arena. They include a company that finds doctors and provides scheduling services; a health information firm; search firm targeting health issues; and two companies focused on insurance.
Case’s new company was announced three months ago to great fanfare, focusing on several areas:
–provide consumers with access to data on physician and hospital cost and quality
–lower health insurance costs by streamlining the purchasing process
–enable consumers to rapidly access their personal health care data at convenient locations
These initial investments appear to be somewhat in line with those priorities, although there are already many companies providing similar or identical services with significant revenue streams.
myDNA.com appears to be an advertising supported health information site, similar to others pervading the web. 1-800 Schedule is another web site that appears to be ad-supported. It does provide directories of providers, but there are no quality rankings, ratings, or profiles beyond basic info.
ExtendBenefits is an individual health insurance firm that also supports HSA administration. They claim 500,000 members and base their pitch on lower costs (claiming individual health benefit programs are 1/4 to 1/2 the cost of group programs (?)). ExtendBenefits is staffed by execs from eHealthInsurance and technology folk. There is an interesting article on their site quoting the CEO of Pitney Bowes on health insurance costs. One of the salient parts of the article follows:
“The same thinking has been applied to psychiatric and substance-abuse cases. The company set up an eight-session early-action program to make sure covered employees in these situations were seen early and often by professionals before they were released for more intensive treatment. Although this is more expensive in the short run, says Critelli, in the long term the program “saves money by getting better results from more data.”
Pitney Bowes has also found that substantially decreasing the cost of medications borne by employees results in fewer of them discontinuing their long-term treatments, which would invite more serious conditions and hospital visits. The company considers screening and diagnostic procedures a critical component of prevention strategies but found through data analysis that some diagnostic tools

Six large national employers have begun to offer employee-paid, low cost low coverage health insurance plans to part-time workers. The plans are provided by United HealthGroup, Cigna and Humana to employees without other health coverage. Plans range from a discount card providing lower cost prescriptions, medical and dental checkups to high-deductible programs with and without pre-existing condition limitations.
According to the New York Times,
“UnitedHealth Group is offering the discount card and four levels of limited coverage in all 50 states at monthly premiums ranging from $59 to $149. In 15 states, United will also offer high-deductible policies that cover major medical costs, under the same group rules with no add-on charges for people with preconditions.
The major medical premiums vary based on an enrollee’s age, sex and location. Humana will offer the high-deductible policies to individuals in 17 states and Cigna will offer them in Arizona only. Under these individual contracts, premiums may also be higher for those with preconditions.”
The program is offered to workers at Sears, Federal-Mogul, IBM, GE, and EMC as well as to independent contractors at Avon Products.
Credit goes to the employers and the not-for-profit group that is sponsoring the initiative, the HR Policy Association.
We’ll be following this closely to assess the results, market acceptance, and as time goes on, profitability of the program.
What does this mean for you?
An interesting experiment to watch and learn from. Possiblya way to stem the tide of uninsurance that is increasing costs for employers and employees as the uninsured population’s care is paid for by those with coverage.

Wellpoint is continuing to consolidate its hold on the nation’s Blues plans with its recent announcement regarding the pending deal to acquire Wellchoice, the holding company that owns New York’s Empire Blue Cross and Blue Shield.
The transaction is valued at $6.5 billion in cash and stock, is scheduled to close in the first quarter of 2006, subject to regulatory approvals.
This continues the trend towards consolidation in the industry, following such notable deals as Coventry-First Health, United-Oxford, United-Pacificare, Anthem-Wellpoint and Aetna-HMS.
According to California HealthLine;
“The (Wall Street) Journal reports that slowed membership increases, large premium increases becoming less common and the fact that size helps insurers negotiate rates with providers has contributed to the trend of consolidation in the insurance industry (Martinez, Wall Street Journal, 9/28). Gary Claxton, a Kaiser Family Foundation vice president and director of the Health Care Marketplace Project, said, “If you want to grow, you have to look at new markets or consolidation.” He said that insurers have been unable to grow by adding new employers or members, so consolidation is their only option.”
Claxton’s comments echo earlier statements here. With Wall Street’s insatiable thirst for growth and continuously improving quarters, health plan execs are desparately seeking new business. There are now 13 remaining publicly traded health plans, and speculation is rampant that the smaller will continue to be acquired by the larger as health care Pac-Man continues. Coventry may be next on the list.
What does this mean for you?
Opportunities for speculation in stocks. Fewer choices in health plans. Confusion regarding who owns which health plan.

As the number of employers offering health insurance declines and Medicaid enrollment increases, the people left without health insurance coverage tend to be members of families where the parent(s) have jobs without coverage.
A new study released by the University of California – Berkeley indicates that less than half of the state’s children will be covered by employer-sponsored plans within five years if premium costs continue to escalate at double digit rates. Of the rest, 14% would have no coverage at all, and the rest would be insured by tax-payer funded governmental programs.
What does this mean for you?
Higher taxes, larger deficits, and increased cost-shifting from providers to insured patients will accelerate the death spiral of the US health care system.