Workplaces brace for health insurance overhaul

After months of hearing forecasts of big hikes in group health insurance rates, Keri Jenkins got a pleasant surprise.

Coverage costs for her company, the Norfolk-based ship agent and broker T. Parker Host, would increase by just 7.9 percent, despite new requirements under the national health care overhaul.

It was the company's smallest rate bump since 2005.

"We were very pleased," said Jenkins, who is T. Parker Host's senior vice president for administration.

Many employers, like Jenkins, anticipated big changes as they developed insurance plans for the first time since the passage of the new health law.

For 2011, the law requires coverage for more people and, in many cases, mandates preventive services without extra charge to individuals - benefits that come with a price tag.

However, South Hampton Roads insurers, consultants and employers said the overhaul won't increase rates more than 4 percent next year, largely because many plans already came close to meeting the requirements.

Overall, including other climbing expenses, local group health insurance costs are rising between 6 and 12 percent - a range comparable to recent years, they said.

For employees, that means more of the same.

"What we've seen is a trend where employers continue to offer less benefits and pass on more of the cost to the employees," said John DeGruttola, senior vice president of sales and marketing for Optima Health, the insurance arm of Sentara Healthcare. "It's really just in response to the double-digit medical inflation that occurs and continues to occur."

Several provisions of the health care law take effect for plans renewed after Sept. 23, six months after the legislation was passed.

For many people insured through their employers, these changes will begin in next year's coverage, which workers are now selecting during an open enrollment period.

Under the law, all plans must cover dependents up to age 26. Children up to 19 can't be denied coverage due to a pre-existing condition.

Insurers also can't establish limits on how much they will pay for covered benefits during the entire time an individual is enrolled in a plan. Plans can no longer terminate coverage retroactively due to honest mistakes on applications.

Other rules are contingent on how much employers change their health plans. Among them is a requirement for plans to cover certain preventive services, such as flu shots and some cancer screenings, without charging copays or co-insurance.

Companies can avoid that and some other mandates by basically freezing their plans as of March. To receive "grandfathered" status, a plan cannot significantly raise employees' responsibility for health costs or substantially reduce benefits. Insurers found that few companies chose this option, though.

Dennis Wance was considering it for his Norfolk-based law firm, Vandeventer Black.

Because of some serious illnesses, health insurance costs would spike next year if his firm chose to grandfather its current plan, he said. However, a new plan probably would mean employees pay a larger portion of their medical bills and receive slightly reduced benefits, he said.

The choice promised to be difficult for a company that prides itself on generous health coverage for its 170 employees.

"These benefits are important," said Wance, the firm's executive director. "That's why we're reluctant to do some of the more draconian things with medical premiums to get the cost down."

In some cases, the new law caused barely a ripple in a company's coverage, especially if its plan already came close to meeting the provisions or if few people qualified for the new coverage.

At T. Parker Host, for example, none of the 56 employees added a new adult dependent, Jenkins said.

Other employers still wrestled with steep increases.

At Hampton-based Old Point National Bank, monthly health premiums rose more than in recent years - between 10 and 20 percent, said Joseph Witt, executive vice president and human resources director.

For his company and its 340 employees, high-deductible plans with health savings accounts have proved a good way to manage costs, he said. Those plans have lower premiums and higher deductibles than traditional plans, and allow employees to save money for medical costs in a tax-advantaged account.

"We're hoping to one day have all of our employees say, 'Wow, these high-deductible plans are so great, there's no reason to be in a traditional plan anymore,' " Witt said. "Because the traditional plans are real dogs."

Insurers said high-deductible plans gained popularity for 2011 because the plans allow employers to pay lower premiums and possibly invest in other benefits, such as matching funds for employee health savings accounts.

Employers also showed more interest in steering employees to wellness programs as a long-term strategy to reduce costs. Programs with incentives, such as gift cards and deposits into the health accounts, tend to work best, said Jeff Ricketts, regional vice president of sales for Anthem Blue Cross and Blue Shield in Virginia. "Cash is king, we've found," he said.

Looking ahead, employers are nervous about future demands of the health care overhaul - even as they wait to see whether it will withstand political assaults.

"I can't say that the health care reform act has presented, in and of itself for 2011, that significant a challenge for us," Wance said. "I think those challenges are yet to come."

Amy Jeter, (757) 446-2730, amy.jeter@pilotonline.com