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Wednesday, Aug 10, 2022
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HEALTH—Employers Brace for More Health Care Cost Increases

With the start of a new year, Valley employers are getting ready to bite the bullet as a number of their health-care providers plan to impose rate hikes of between 10 and 13 percent. The double-digit increases reflect increasing medical costs over the past 10 years, insurers say, but for many companies and their employees, the end result will be higher health insurance premiums, payroll deductions and deductibles. Although many Valley companies still await the potential double-digit rate increases, some are hoping for the best. Debra Bennett, human resources manager for Granada Hills-based Duncan Industries, says rate increases are always expected at this time of year. “But the question is how much?” Bennett said. The security services company, which employs about 30 employees, would be forced to pass along any major increases to its workers, some of whom may opt to cancel their insurance altogether. Beverly Hayon, a spokeswoman for Kaiser Permanente Inc., with 6 million patients in California, said her company’s 10-percent rate increase is a reflection of the overall rise in health care. “The costs of pharmaceuticals is 19 percent a year and that is a huge challenge for an organization like ourselves to provide the kind of service we provide at a reasonable cost,” she said. According to a study by Illinois-based health care consulting firm Hewitt & Associates, companies can be expected to pass along at least 25 percent of any rate increase to their workers. Moreover, the average employer-provided health plan (which cost $4,222 last year) will increase by about $500, forcing employees to pay an additional $125 for coverage. The study showed that companies will be hit by an average 10 percent rate increase for preferred provider organizations, those plans that contract with selected physicians. Health maintenance organizations will generally offer a 13 percent increase while point of service plans, those in which physicians are paid at the time they provide the service, will increase by 10 percent, according to the study that examined 2,000 health plans in 139 cities. Statistics show this will be the third consecutive year of marked rate increases. Last year, rate increases averaged 9.4 percent. “So far, we’ve been lucky and haven’t had any rate changes,” said Carlos Garcia, president of Garcia Research Associates, which employs 24 people in Burbank. “But you never know.” Investors look to bottom line Jack Bruner, an analyst with Hewitt, said health maintenance organizations in particular are under pressure from investors to increase profits. But perhaps the biggest impact will be on those who cannot afford the rate increases and will opt out of their plans altogether. A study by the nonprofit Economic and Social Policy Research Institute in Washington D.C. estimates that the number of uninsured Americans could jump to 50 million in 2001, up from 44.3 million in 1999. Government employees also will see higher costs, with single federal employees paying an estimated 14 percent more beginning this month, while those with families will pay 21 percent more, according to Blue Cross, which insures about half of the nation’s 8 million federal employees. Bruner said some companies, depending on the industry and circumstances, will try to absorb the costs to avoid losing valuable employees. And, he said, some could benefit by simply shopping around. “Employers should regularly review the performance of their current health plans and eliminate those that aren’t cost-efficient or those that don’t meet employees’ needs,” he said. Companies with older workers with certain conditions like diabetes or asthma can also save money by contracting with health plans offering programs in those areas, giving employees more specialized care. Some workers, like Norah Mullen, a Woodland Hills store clerk, said after a recent 10-percent rate increase that she is looking into other health care options, even going so far as to suggest another health care provider to her company. Many self-employed workers are also looking for alternatives. “You start wondering if it’s really worth it,” said Joe Solis, a Glendale auto repair shop owner who pays about $4,000 a year for his health insurance. But for Hewitt’s Bruner, the latest increases are only the beginning. “Companies may continue to see 10-percent increases over the next few years,” he said, “and this will result in a significant impact on an organization’s bottom line.”

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