Health insurance rates slow

Connecticut employers, who have been hit hard by skyrocketing health care costs in recent years, could be getting some relief in 2012, industry experts say.

Average rate increases being proposed by some health insurance companies for the end of 2011 and 2012 are coming in lower than previous years. Local brokers say they are observing lower rate hikes, ranging, on average, from upper single digits, to low double digits.

In some rare instances, employers that have implemented health improvement programs are actually seeing rate decreases, a relatively unheard of occurrence, brokers said.

Nationally, employer health care costs are expected to rise 5.9 percent in 2012, a noticeably lower rate than the 7.6 percent increase a year earlier, according to the 2011 Towers Watson Health Care Trend Survey.

“I think in general we are starting to see a softening of the marketplace,” said Brian Driscoll, the chief operating officer of Farmington-based Ovation Benefits. “That’s something we expect will run into 2012 as well.”

But, while smaller rate increases might be welcome news, rising health care costs for most Connecticut employers are still creating significant challenges, and will likely continue to push companies to shift more of that cost burden onto workers.

Driscoll said while rate increases have been all over the board, many of his clients are seeing average rate hikes for the fourth quarter 2011 and 2012 in the high single digits, which is down from double digit increases in the past few years. And he said new federal health care reform requirements have something to do with it, particularly new rules that require insurers to spend minimum levels of premium dollars on medical expenses.

In particular, the law requires health insurers to spend at least 80 cents on medical expenses for every $1 in premiums they collect for individuals and small businesses. For large employer health plans, insurers must spend 85 cents of every premium dollar.

If insurers don’t achieve those spending levels, they must offer rebates to customers, forcing insurers to take a closer look at the rates they charge employers, Driscoll said.

“Insurance companies are starting to get more aggressive in adhering to health care reform,” he said.

Meanwhile, Driscoll said this is probably the first year where several of his midsize employer customers are receiving rate decreases. And all of those firms have adopted some type of health improvement program in recent years. Those programs are now starting to provide a return on investment.

They include wellness programs, which work to educate employees, particularly those with chronic diseases and conditions, on health risk factors as well as get them to be more active, and detailed health screenings, which provide information on blood pressure, glucose levels, and other important health measures.

“Companies that invested in improving the health of their workers are seeing lower rate increases,” Driscoll said.

Jason Gutcheon, a partner at Professional Business Insurers in West Hartford, said his small group clients are seeing average fourth quarter rate increases in the 9 to 15 percent range. That is considerably lower than the average 20 to 25 percent rate hikes those clients saw a year earlier.

“It’s not nearly as bad as last year,” Gutcheon said.

Bill Husic, the executive vice president and actuary at the Lockton Benefit Group in Farmington, which represents larger employers, said he expects his clients to see smaller rate increases in the coming year as well, although medical costs are still trending 11 to 12 percent higher. Prescription drug cost increases, however, are trending downward by a couple percentage points, Husic said, possibly because some brand name drugs are going generic, which is lowering costs.

Meanwhile, insurance companies have begun filing rate requests for fourth quarter 2011 and 2012. Connecticare will be raising fourth quarter rates on average from 6.8 percent to 8.6 percent on its small group medical plans effecting 52,605 members. The company said the rate changes, which take effect Oct. 1, are for renewals and new policies and was due to increasing medical costs.

Anthem Blue Cross and Blue Shield has proposed an average annual rate increase of 5.5 percent for its small group members in 2012. If approved, that would impact 55,000 policyholders.

Oxford Health Plans/UnitedHealthcare had one of the higher requests, asking regulators for permission to raise its small group rates an average of 14.4 percent beginning Jan. 1. That would impact 16,200 policyholders.

“The rates we filed reflect what is needed to keep pace with medical cost trends in Connecticut,” said UnitedHealthcare spokeswoman Anayo Afolabi. “UnitedHealthcare prices its health plan premiums based on medical costs and expected claim expenses.

“Premium rates largely reflect the cost of health care — hospital, physician and pharmacy costs continue to be among the largest drivers. While consumers’ utilization may have moderated, unit pricing (the prices charged by hospitals and physicians for specific services) continues to increase,” Afolabi added.

Despite potential lower rate increases, however, employers are still feeling the effects of rising health care costs, which will likely continue to force employers to shift more of the cost burden onto their workers, brokers said.

According to the National Business Group on Health, 53 percent of companies they recently surveyed said they plan to increase the percentage that their employees pay toward premiums, with most raising it by less than 10 percent.

Meanwhile, the percentage of Connecticut residents who get their health care benefits from their employer is on the decline.

According to U.S. Census data, approximately 65.2 percent of the state’s 3.497 million residents got insurance through their employer in 2010, compared to 67.4 percent in 2009.

And 12.3 percent of the state’s population directly purchased their own insurance last year, up from 11.1 percent in 2009.

Gutcheon, of the Professional Business Insurers, said he has seen a 50 percent increase in the number of individual health insurance policies his firm has written, making him pay more attention to that business.