Health insurance costs slow in 2005

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Throughout the late '90s and into the early part of this decade, annual insurance premiums frequently rose at double-digit rates. Even as recently as 2004, the cost of insurance jumped 11.2 percent in one year. But last year something changed, and premium hikes moderated.

Some of it can be attributed to insurance business cycles. It's common for health plans to have competitive periods, where they're forced to keep premium increases in check or risk losing business to their competitors.

The Minnesota Department of Health, which tracks these insurance trends, says it appears that insurers have entered a new competitive phase.

But the department's Julie Sonier says health plans have also seen a slowdown in what they spend on health care.

I think more and more people are going to decline health insurance, as their own cost grows dramatically.

"We've seen two years in a row of slower growth in the actual amount of claims that health plans have to pay. And so that certainly has played a role in the slowdown of premium growth," says Sonier.

The findings are based on commercially sold health plans in Minnesota, which cover less than half of all people who have health insurance. But experts say the results appear representative of overall trends in the market.

One area where pressures are easing is the cost of treating chronic conditions like diabetes, heart disease and asthma, which tend to be expensive cases.

Kathy Cooney, vice president of HealthPartners, says her company has invested a lot in improving chronic care outcomes and now it's reaping the rewards.

"We're looking at our disease management programs now, and seeing a payback as good as three to one," says Cooney. "And so as you're seeing the fruits of that, we're going to see the lower increases."

Health plans are also saving money on prescription drugs.

Medica Chief Medical Officer Charles Fazio says use of cheaper generic drugs has increased significantly.

"Five years ago, we were probably sitting between 45 and 50 percent use of generic drugs on average, across a lot of indicators," says Fazio. "I'd say now we're probably closer to 56 to 60 percent."

Insurers also say that use of the health care system is declining in some areas.

Blue Cross Blue Shield health trend analyst Christy Kriha says patients are finding more appropriate ways to deal with simple medical issues.

"If you have a fever, members may call our 24-hour nurse line or use a self-care book before they would go to the doctor, because now they are trying to budget their health care dollars a little more effectively," says Kriha.

That could be because more and more employees are paying a bigger share of their health care bill. The health department reports that out-of-pocket costs climbed to just over 13 percent of total health spending last year. That's up from 10 percent five years ago.

Health consultant Michael Scandrett says it's good if employees are being more judicious with their health care dollars. But he doubts these types of behaviors and strategies will save enough money long-term to arrest health care inflation.

"I really don't see anything that's being done currently that's going to bring the rate of growth down to where it is for wages, or the growth of the economy in general," says Scandrett.

In the meantime, Scandrett says he's worried that many employees have reached the upper limits of what they can bear financially.

"The most important part of this trend is that I think more and more people are going to decline health insurance, as their own cost grows dramatically," says Scandrett. "And I think that's already showing up in some of the earlier Health Department data that showed growth in the rate of uninsurance in Minnesota."

The Minnesota Department of Health report, released last year, shows the state's uninsured rate has reached 6.7 percent. The department says the increase in uninsured Minnesotans is primarily because fewer employers are offering health insurance as a benefit.

But even with the dramatic slowdown in premium increases last year, the cost of health insurance is still rising faster than wages, per capita income, and overall inflation. And Scandrett thinks it's only a matter of time before employees who have coverage start making similar choices to opt out.