Healthcare premiums to leap again

Health Insurance Rates could increase ranks of uninsured



By Jeffrey Krasner, Globe Staff | August 2, 2005



Most Massachusetts companies and their workers will get hit with increases in their health insurance premiums of 10 percent or more beginning next year, according to the state's largest insurers.



Insurance companies and many employers are already negotiating rates and coverage for 2006. Insurers and industry consultants say employers may end up absorbing a bigger share of premium increases. Many companies will also opt for health plans in which workers have to pay higher-out-of-pocket costs to keep premiums down.



The double-digit increase -- coming on top of five consecutive years in which premiums increased by at least 10 percent -- are expected to lead to a greater number of uninsured people in the state as more companies and workers find coverage too costly.



''As prices go up, some at the margin won't be able to afford to cover their families," said Michael Doonan, executive director of the Massachusetts Health Policy Forum, a nonpartisan research group. That will drive more people to Medicaid, the federal program administered by states for low-income individuals, Doonan said.



Insurers blamed the continued steep rise of health premiums on increasing hospital costs, rising prescription drug expenses, and an aging population.



''Baby boomers are a very demanding group," said Vincent Capozzi, senior vice president of sales and marketing at Harvard Pilgrim in Wellesley. ''They're all in their late 40s to early 60s, and their use of the healthcare system is at a high level."



But the rate of increases is slowing, noted Capozzi and other insurance executives. Harvard Pilgrim Health Care, the state's second-largest insurer with about 885,000 members, predicted typical increases of 7 to 13 percent in 2006, compared to the 8 to 14 percent that rates went up this year.



Since 1999, the average total annual cost of health insurance for an employee in the Boston area nearly doubled, to $7,999 in 2005 from $4,144, according to a study conducted by Hewitt Associates, a human resources and consulting firm in Lincolnshire, Ill.



''The projected increases will hit employees in two ways," said Susan Connolly, worldwide partner and consultant specializing in health care benefits for Mercer Human Resource Consulting in Boston. ''Employers are likely to increase cost sharing by adding higher deductibles and increasing copays. At the same time, employees are likely to pay more out of their paycheck to cover a higher insurance premium."



Insurers have tried to control costs through aggressive management of patients with chronic diseases, and plans that require consumers to pay a greater share of costs.



Blue Cross and Blue Shield of Massachusetts, the state's largest health insurance provider with 2.75 million members, said it expects to raise premiums 10 to 14 percent for employers with more than 50 workers.