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Will Change Or Stability Be The Health Insurance Story In 2009?

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Will 2009 be a year of dramatic change in the U.S. commercial health insurance market-or another year of surprising stability?
Executives at Corporate Synergies Inc., Mount Laurel, N.J., are expecting the recession to provide some stability, by using up some of the political energy that the incoming Obama administration and the new Congress otherwise might have devoted to overhauling the U.S. health care system.
There probably will be new benefits mandates, but “we don’t believe there will be a major change in the delivery of health care or the insurance industry,” says Ron Weiss, senior vice president at Corporate Synergies.
Lee Barson, a health savings account specialist at ACS/Mellon HSA Solution, part of Affiliated Computer Services Inc., Dallas, agrees the federal government will be less aggressive about changing the commercial health coverage system than some might expect.
“It is difficult to imagine a massive restructuring of the health care financing and delivery system-and the accompanying cost increases for both employers and employees-when every available financial resource is being directed to shoring up a distressed economy,” Barson says.

At the employer level, Weiss has not seen any dramatic increase in interest in plans that incorporate HSAs or health reimbursement arrangements, moves to replace major medical plans with limited benefit plans, or further efforts to shift health benefits costs to employees through increases in deductibles, co-payments or coinsurance levels.
“We’ve seen a lot of stabilization in plan design,” Weiss says. “The cutting of benefit levels has definitely subsided.”
In North Carolina, Rick Kelly, an associate at Progressive Benefit Solutions L.L.C., Raleigh, N.C., is feeling more rumbling.
Excluding the effect of plan design changes, the underlying cost of medical care in his market is continuing to increase about 8% to 13% per year, and “that’s obviously a very high rate of inflation,” Kelly says. “This is probably year 2 of what is a 3-year cycle where things are changing very rapidly.”
About half of Kelly’s group health clients already offer an HRA or HSA plan, and many others offer high-deductible health plans with providing health account programs, Kelly reports.
Here is a look at some of the other trends that might shake the U.S. commercial health coverage market in 2009.
1. Rising prices will collide with falling budgets.
Health carriers throughout the country seem to be committed to demanding higher rates, according to Angela Braly, president of WellPoint Inc., Indianapolis.
“Heading into 2009, our significant national competitors are all talking about being disciplined in their pricing for fully insured business, and we’re seeing some early signs of firmer pricings,” Braly said in October, during WellPoint’s third-quarter earnings conference.
Consultants at Milliman Inc., Seattle, predict 2009 group health renewal premiums will increase an average of 8.4% for the health maintenance organization plans it serves and about 11%-12% for the preferred provider organization plans it serves.
“The carriers are tightening their belts and letting bad business walk,” Weiss says.
But the carriers have been asking for higher prices at a time when the number of civilian workers has been falling: Only 145 million U.S. residents had civilian jobs in November 2008, down 1.7% from November 2007, according to the Bureau of Labor Statistics. The number of U.S. residents with full-time jobs-the jobs most likely to provide health benefits-fell 2.8%, to 118 million.
UnitedHealth Group Inc., Minnetonka, Minn., says it sees signs that the recession will have a noticeable effect on group plan enrollment. “Some smaller employers in particular are choosing to withdraw from participation in this market,” the company says in a handout prepared for its recent investor day conference.
Some of the displaced group health plan members will buy temporary health insurance, or ordinary individual or family health insurance, but many will rely on public coverage or go without coverage, analysts predict.
For experienced benefits firms, the economic problems could create opportunities, Weiss says. “A lot of companies are looking for ways to cut costs and not cut their benefits.”
2. Carriers will continue to spend more time administering government health programs.
WellPoint, UnitedHealth and other large insurers, such as Aetna Inc., Hartford, and CIGNA Corp., Philadelphia, are devoting more and more of their financial statements and earnings releases to reports on efforts to serve Medicare, Medicaid, state children’s health insurance programs, and the military’s TRICARE program.
At Progressive, Kelly sees some employers using limited benefit plans to serve part-time workers, seasonal workers and other workers who have not had major medical coverage.
But at Corporate Synergies, Weiss says he sees few employers offering limited benefit plans, in part because a high percentage of the workers who could use the plans already qualify for participation in government health programs that offer better benefits.
3. Main Street might have an easier time competing with Wall Street.
For the past 15 years, publicly traded insurers and insurance brokers have dominated the benefits headlines and captured a large share of the benefits market.
Today, an independent regional broker with a strong relationship with a plain vanilla regional bank may have steadier finances than a broker that has been raising cash by selling stock to the public or placing bonds with private equity firms.
4. Wellness programs will continue to be popular.
Proving that wellness programs hold down claims costs is difficult, but the employers with strong wellness programs seem to be doing an above-average job at holding down claims, Weiss says.
Health policy experts at PricewaterhouseCoopers L.L.P., New York, say more employers will use incentives, such as gift cards, to encourage employees to participate in wellness programs.
“Wellness programs don’t work if employees don’t participate, and most of them don’t,” PricewaterhouseCoopers consultants report, citing research from the firm’s Health Research Institute.
Institute researchers found that fewer than 15% of eligible individuals enrolled in wellness programs actually participate, but that concrete incentives increased participation levels by 200% to 400%.
5. Employee assistance programs will have to do more heavy lifting.
Stand-alone EAPs tend to cost a few dollars per employee per month, and many group health and group disability carriers bundle EAP services along with the basic plan coverage.
Employers are not necessarily asking more about EAPs, but Weiss and Kelly agree EAP utilization rates are increasing.
Employees are using the EAPs to handle stress and also to get advice about the nuts and bolts of dealing with concerns such as mortgage problems and layoffs, Weiss says.
6. The underinsured and the priced out may get more media attention.
The Commonwealth Foundation, New York, published a study in June concluding that 9% of U.S. adults with annual incomes between $60,000 and $99,999 had been underinsured at some point in 2007.
Researchers at the Employee Benefit Research Institute, Washington, already include data in some EBRI reports on the difficulties insured people have getting access to what they feel is needed care.
EBRI researchers noted in November, for example, that 16% of U.S. adults with conventional health coverage and annual household incomes over $50,000 say they have avoided or delayed getting medical care due to cost, up from 12% in 2007.
PricewaterhouseCoopers consultants say the underinsured soon will surpass the uninsured as “health care’s biggest headache.”
“The uninsured draw most of the attention, but the number of underinsured is growing even faster-an estimated 25 million adults qualify as underinsured, an increase of 60% since 2003,” consultants at the firm write.” With some but not enough health insurance, the underinsured often can’t or won’t pay the high deductibles and co-pays for the services they need. In 2009, we could see more bad debts for hospitals, more cost-shifting to commercial plans and more patients delaying or foregoing care.”
Many hospitals have begun to prequalify patients, and some are using credit card-like systems to verify patients’ eligibility and estimate how much insurance coverage the patients have, the consultants write.
7. Growth in health account plan enrollment will be uneven.
For now, use of HSA and HRA programs “is a regional thing,” says Deane Elek, director of the Benefit Advisors Network, Cleveland, a benefit firm consortium.
The programs are popular in regions such as the Midwest and the Southeast but doing poorly in areas such as the Northeast and the Mid-Atlantic states, Elek says.
Barson says he expects the recession to cause both employers and employees to take another look at health account program options. “Since HSA-qualified plans cost less than most other options, employers are expected to offer HSA-qualified plans in record numbers for 2009,” he says.
Meanwhile, employees who have a choice between an HSA plan option and a more expensive traditional plan option may take the HSA plan option, Barson says.
9. Flexible spending account programs and health account plans will be higher-tech.
By June, large drugstore chains are supposed to set up cash register systems that will help them document that consumers are using health account cards to buy eligible health-related items, to reduce the need for consumers to submit paper receipts.
“Industry studies say roughly 30% of FSAs now have benefit cards,” says Chris Byrd, executive vice president at Evolution Benefits Inc., Avon, Conn. “You can see that going much higher as these fully electronic transaction rates go up. It will be very good for anyone in this business because it will expand the market rather dramatically.”