Traditional plans rising 10% to 15%; some just give up

NORTH BAY – In an informal survey of the region’s top insurance brokerages, experts described prospects for the open enrollment season in several recurring and dismal themes: watered-down coverage, double-digit increases and more simply giving up on benefits all together.

“The plans have gotten to the point where it can barely be considered coverage anymore. I say just give people a raise and forget the benefits,” said San Rafael-based Costello & Sons Insurance broker Jeff High.

In a discussion with 10 North Bay brokers, one trend prevailed over all others: the drastic shift in health savings account plan structure and pricing. Some reported increases in rates as high as 88 percent on renewals and deductibles climbing as much as $10,000. At the same time, increases in the traditional market are still going up by 12 percent and 15 percent for small groups, with more modest increases for larger companies.

“The rate increases this year in HSAs is the byproduct of people’s desire to get away from another 15 percent increase in traditional plans, but the plans were created to foster less health care utilization, and the actual experience was just the opposite,” Mr. High said.

When savings accounts, high-deductible-type plans, began to proliferate a couple of years ago, they were priced with the assumption that only young, healthy individuals would buy the plans. Instead, those with high plan usage purchased the products, in many cases because employers stopped offering anything else.

Essentially, once the employee hits the out-of-pocket, they have little incentive not to take advantage of the full coverage. The over-usage was further amplified by employers that agreed to fund a large percent of the deductible.

“What has happened is people order all kinds of tests and procedures knowing they are fully covered, and as it turned out, the plans were underpriced,” said Novato-based United Benefits Advisors broker Keith McNeil.

“Carriers are adding co-pays and fees along with premium increases. Everything is kind of changing all at once, even as we speak.”

As a result, he said every carrier adjusted their savings accounts plans and even eliminated some offerings all together, though the most dramatic increases have occurred in small group pricing. Kaiser Permanente, which offers the most popular versions of the plan in the North Bay, eliminated its zero co-pay, $2,200 deductible plan, for example, and increased its zero co-pay, $1,500 deductible HSA to a $2,000 deductible and increased rates by 22.5 percent.

One Blue Shield plan increased by as much as 88 percent, and many carriers added additional co-pays after the deductible, including $300 a day for hospital stays, $100 surcharges for emergency room visits and $10 and $20 for prescriptions. Anthem Blue Cross also eliminated several plans, according to brokers.

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“The 100 percent coverage after the deductible is pretty much nonexistent this year,” said Santa Rosa-based NorthWest Insurance Agency broker Mike Parr.

“Employers are still saving money with the plans, but there is definitely a great deal of frustration out there. They got into these plans with the impression that their employees would be fully covered after the deductible, and now their rates are increasing and they are getting less and less.”

Some brokers doubt the over-utilization was an oversight by insurers.

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“Yes, the model is somewhat new and a work in progress, but it was also a situation where carriers came in and undercut the market to secure a big book of business while the products were first getting hot. Two years later, the writing is on the wall,” said Windsor-based Rogers & Young Insurance Services broker Shane Rogers.

“Employers feel a little bit like they got the bait and switch.”

St. Helena Insurance Associates Vice President and owner Linda Beard said some are attempting to patch together coverage with add-on plans like those offered by carriers Aflac and Colonial Supplemental Insurance. The products that average about $17 to $40 a month cover specific services like colonoscopies, mammograms and the like.

“Businesses are really struggling right now, and the feeling is definitely that something needs to change,” Ms. Beard said.

On the property casualty side, the story is not quite as scary. It’s still a soft market, but brokers say not for long.

“Underwriting has definitely tightened, and some class codes are starting to creep up,” said David McDonald, managing co-owner of HML Insurance Services, formed this summer with the merger of Hover Insurance Services Inc. and McDonald-Leavitt Insurance Agency in Santa Rosa.

Mr. McDonald said Traveler’s was the first major carrier to post several significant rate increases this year, and he expects many to follow suit within the next 12 months.