Pass along

Health care insurance costs for Milwaukee-area businesses are still rising, but not as much as in recent years, and greater shares of those cost increases are now being passed along to employees.

"We’re leveling off," said Andrew Serio, president of Wauwatosa-based Health Care System Consultants Inc. "We’re coming to the end of the bad cycle and moving into another cycle."

"It is getting a little bit better," said Riley Enright, assistant vice president of large accounts for Waukesha-based R&R Insurance Services. "I do see the market softening to a degree. But, it’s also like throwing a deck chair off the Titanic to keep it afloat."

Serio said the cost for renewals of business health insurance packages are up about eight to 15 percent in the first half of 2004, compared with the 15 to 23 percent increases he saw in the first half of 2003.

Enright and Jon I. Cyganiak, an insurance agent for Brookfield-based Cyganiak Planning, Inc., said they are seeing cost increases in the teens for renewals this year, compared with 20 to 30 percent last year.

"We are seeing increases. However, on average, we are not seeing the 20 to 30 percent," Cyganiak said. "We are seeing lower increases than that on average."

To cope with rising health care costs, more businesses are asking their employees to pay larger portions of their health care costs, industry observers say.

According to the Economic Outlook Survey recently released by the Wisconsin Manufacturers & Commerce, 81.3 percent of the participating employers are responding to rising health care costs by increasing their employees’ contributions, up from 78.8 percent just one year ago. About 28.1 percent of the employers are decreasing benefits.

Some employers are requiring their employees to contribute more from their payrolls. Some are making their employees pay higher deductibles and co-payments when they receive health care.

Others are requiring their employees to pay both higher deductibles and have higher paycheck deductions.

Cyganiak said some firms are giving their employees a choice between paying higher deductibles or having higher payroll deductions.

"I think health care spending in general has dropped. In fact, it has dropped for the second straight year," Cyganiak said. "I think it is a result of employers changing their benefit plans. Employees are paying more out of their pocket. Employees now realize the cost."

Employers who are passing along higher health care costs to employees are usually only trying to protect their businesses, Enright said.

"It’s not like the employer is getting fat and happy off these," he said. "They are trying to give their employees a fair deal and still stay afloat."

As employees and their families are required to shoulder more of their health care burdens, they will have less disposable income and less buying power in the local economy. That impact may not be felt until those bills come due.

Consumerism

However, Serio said businesses that make their employees pay higher deductibles when they receive health care services are doing a good thing, because that provides employees an incentive to stay healthy and not make unnecessary visits to the doctor.

Many health care reform advocates say that kind of consumerism will be key to reining in costs.

However, businesses that require their employees to contribute more from their paychecks for health insurance, on the other hand, are actually providing their employees an incentive to overuse health care services, he said. Those employees may believe they might as well go to the doctor, even for a minor ailment, because they are paying so much for health care even if they don’t receive care.

"If you increase premiums, you don’t do anything to control health care costs," Serio said. "You’re meeting a budget, but you’re not mitigating health care costs for the community."

Reducing how much people utilize health care is one way to reduce the costs of health care in the region, health benefits consultants say.

"The real key to controlling costs is to control the utilization," Serio said. "Look at the well people and keep them well. Be sure they get physicals and annual exams."

A consumer-driven health care system would encourage consumers to use health care services less and encourage health care providers to find ways to reduce their costs and prices, some health benefits consultants say.

"That is where this is going," Cyganiak said.

"There is (currently) no incentive for providers to offer services at a lower cost, because of the separation between the people who are ordering the services and the people that are paying for them," said Richard Blomquist, president of Milwaukee-based Blomquist Benefits.

Insurance brokers point to a variety of factors for the lower increases in health care costs this year, including less utilization of health care services by patients and increased competition for marketshare by insurance carriers.

Health care costs have become so high in the Milwaukee area that some insurance companies are offering more competitive prices to attract more customers, some industry observers said.

"There’s more competition among the carriers than there has been for years," Enright said. "We have come to a certain (price) saturation point. The top carriers are trying to find more market share right now."

Some have expected the arrival of WellPoint Inc., which acquired Blue Cross and Blue Shield of Wisconsin last year, into the Milwaukee market could help reduce health care costs. The company could use its size to negotiate lower costs.

In June of 2003, WellPoint Health Networks Inc. announced it was buying Cobalt Corp. for $906 million. Then in October, Indianapolis-based Anthem Inc. announced it was buying WellPoint Health Networks for $16.4 billion. The merged company will be called WellPoint Inc. and will be the largest managed care company in the nation.

"With Wellpoint coming into the market, that will force increased competition among the insurance companies and HMOs and will cause prices to be lower this cycle than the last one," Serio said.

New construction

Some health care industry observers say the large number of hospital construction projects has contributed to the high health care costs in the Milwaukee area.

Recenlty, Aurora Health Care’s plans for a new hospital near Oconomowoc has drawn some criticism.

Blomquist predicted that Waukesha County hospital, if built, would increase the cost of health care in the Oconomowoc area by 15 to 20 percent.

"The demand for services (in western Waukesha County) is not going to go down," he said. "You’re just dividing the pie. (Health care providers) will all respond by upping their fees so they have enough revenue to cover expenses."

The Business Health Care Group of Southeast Wisconsin, a coalition of dozens of Milwaukee-area businesses including Rockwell Automation Inc., Briggs & Stratton Corp., Harley-Davidson Inc., Miller Brewing Co. and others, is trying to drive down the cost of health care in southeastern Wisconsin by establishing limits on what they will pay for common medical procedures.

The coalition represents more than 120,000 employees and dependents. Its fee schedule pays physicians 150 percent of what Medicare pays for thousands of common medical procedures.

The idea is to provide a higher patient volume to physicians who agree to charge less.

However, only about 20 percent of Milwaukee-area doctors have agreed to participate in the health plan created by the coalition.

"We have been working to get as many physicians signed up as possible," said Matt Gonring, vice president of Rockwell Automation and a spokesman for the coalition. "It’s a laborious process."

About 8,000 employees at Rockwell Automation and Briggs & Stratton have been required to participate in the coalition’s plan, called maximum allowable charge (MAC), since early this year. Employees of some of the coalition’s other member companies began participating in the program July 1. Gonring declined to identify those companies. Employees of other member companies will be participating next year.

"By January of next year, we will have tens of thousands of more consumers on the street asking for the MAC," Gonring said. "The strength is in our numbers. We’re not going away."

Because the coalition’s plan has not attracted more doctors to participate, Gonring said, businesses in the coalition have placed a cap on the out-of-pocket expenses their employees will have to pay at $1,000 per year.

"We knew it would be challenging for the first (participating employees)," he said. "We’ve been flexible with our employees. We are in uncharted waters here. But we have not deviated from the course we have gone down. This is the most viable alternative we have been able to come up with."

Serio has criticized the coalition’s plan, but said it has had one positive impact.

"That group of CEOs has gotten the attention of the CEOs of the health care systems," Serio said. "There will be an effort to work together to solve the problem (of high health care costs). At least it’s gotten their attention."

"Clearly we have gotten the attention of the big providers," Gonring said. "Clearly, we’ve gotten them engaged in a dialogue that there wasn’t before."

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