A combination of factors enabled Blue Cross Blue Shield of Michigan to curtail premium increases for 2004, although subscribers can still expect a double-digit rise in the cost of providing employee health coverage.
Blues policyholders in the small group market in western Michigan will see an average 12.4 percent increase in their health premiums for 2004. Statewide, Blues subscribers renewing their policies will experience an average 11.4 percent increase for next year.
The increases are based on existing benefit levels. Actual increases will vary depending on an employer’s benefit package and any alterations they may make when renewing their policies.
Darrell Neusome, regional sales manager for the Blues, credits the reduced rate of increase to initiatives designed to affect cost and utilization of health care services. Among them are steering people toward use of lower-cost generic medications and stepped-up efforts in managing chronic diseases to keep people out of the hospital and emergency rooms.
Those efforts have led to the stemming of rapidly rising utilization rates that drive health care costs higher.
“We see this as a real positive thing,” Neusome said. “We believe that trend will continue.”
The Blues, with about 4.8 million subscribers statewide, has also begun to catch up with setting rates at the proper level to cover underwriting costs, Neusome said. Part of the steep premium increases of recent years stemmed from a need to cover underwriting losses and adjust rates accordingly, he said.
The Blues, the “insurer of last resort in Michigan” that must provide coverage to all who apply and that controls some 70 percent of the small group market, last year posted a $101.6 million profit, which came after losses of $48.3 million and $27.4 million in each of the two previous years.
“We fell behind,” Neusome said. “They’re (rates) now getting to where they need to be. We’ve definitely made a strong move in that direction.”
Elsewhere, subscribers of Grand Rapids-based Priority Health will see increases, before plan alterations, of 13 percent to 15 percent for 2004 for large group employers above 50 employees, and 15 percent to 17 percent for small group employers of 1 to 50 employees, said Dave Bilardello, Priority Health’s director of group underwriting.
For the small group market, the anticipated 2004 increases for Priority Health customers are in line with those of recent years, including the 16.4 percent increase in 2003, 14.6 percent in 2002, and 15.9 percent in 2001.
As always, rising utilization rates, particularly in medical technology and pharmaceuticals, are driving premiums upward, Bilardello said.
“It’s a lot of the same things,” he said.
Employers, by shifting a greater burden of health care costs to employees through higher premiums, co-pays and deductibles, have been able to reduce annual premium increases to single digits, Bilardello said. He anticipates a deductible based HMO plan that Priority Health debuted last January to gain increased interest for 2004.
Priority Health has more than 400,000 members in its various managed-care plans.
At Blue Cross Blue Shield, the premium increases for 2004, while still sizable, are substantially smaller than those experienced in recent years. Blues customers in the small group market last year saw their premiums go up an average of 22 percent.
The insurer blames past losses largely on adverse selection, the alleged cherry-picking by commercial carriers of younger, healthier employee groups that are less costly to insure, leaving the Blues with the costliest population to cover.
The stemming of the Blues’ rate trend for 2004 is coincidental to reforms state lawmakers enacted this summer to crack down on adverse selection. Any benefits for the Blues resulting from small market reform remain a year or two away, as the risk pool evens out, Blue Cross Blue Shield spokeswoman Helen Stojic said.
“It will take a while to feel the effects of small market reform. It’s not an immediate thing,” Stojic said.