Rising rates make health insurance harder to offer

Practice Management. By Mike Norbut, amednews staff. Nov. 25, 2002.

PRACTICE MANAGEMENT

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Edith McFadden, MD, finds it "preposterous," but the reality right now is she can't provide health insurance for her single employee because it's too expensive.

"In the past, it's been over $10,000," said Dr. McFadden, an otolaryngologist and allergist in Milwaukee. "My employee now is not married and has no insurance. I'm concerned if there's any kind of accident, she has no catastrophic coverage."

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Many physicians are feeling the health insurance pinch, especially as premiums continue to rise. Some reported increases have been as high as 20% to 30% this year, said Karen Roney, public relations specialist for the AMA Insurance Agency.

The increase was even more for Kent Walker, MD, an Ottumwa, Iowa, dermatologist working in a two-physician practice. Rates to cover three of the practice's eight total employees went up 45% this year, to $535 per employee per month. Dr. Walker said the practice was still weighing its options for next year, but he and his partner are considering giving employees a set amount of money that would help them subsidize their own individual insurance.

"We always tried to provide Cadillac coverage," he said. "But Cadillac coverage is getting too expensive."

Without a large pool of employees to help spread the risk, premiums are naturally higher for small practices than they would be for a large company. The rising rates have forced doctors to shop around more this year, and it's even made some of them put their own personal differences with managed care products aside and consider them as options for their practices, Roney said.

"Physicians aren't showing the loyalty to non-managed-care plans that they may have shown in the past," Roney said. "Whereas some physicians wouldn't have considered HMOs, now they're looking at them."

Some physicians may find the search for an affordable employer health plan comparable to the struggles they face in negotiating reimbursement rates with insurers. But companies are offering more plans these days that target small businesses -- a category under which most physician practices fall.

More insurers are offering defined-contribution plans, which allow employees to choose their coverage and deductible. Businesses also can consider medical savings accounts, which combine high-deductible, catastrophic insurance with a consumer's tax-exempt savings account, or the recently approved health reimbursement arrangements, which essentially are employer-funded versions of MSAs. The AMA endorses both MSAs and HRAs as part of its plan to help reduce the number of uninsured people in the country.

Several insurers, such as CIGNA HealthCare, Aetna Inc. and WellPoint Health Networks Inc., offer MSA programs, the contributions for which can come from either the employer or the employee. Once the money from the account is spent, the employee pays out of pocket until a pre-set deductible is met.

Meanwhile, Anthem Inc.-owned Blues plans in Indiana, Kentucky and Ohio recently announced a defined-contribution plan for small employers, which has already started in Ohio and will be introduced in the other two states in January 2003.

Aetna Inc. and Humana Inc. also offer similar products in markets around the country.

Physician practices are obvious targets of Anthem ByDesign, as it is called, because office employees, even in the smallest of groups, have varying health needs, said Mark Isett, vice president of product development for Anthem's Midwest region.

Isett likened the plan to buying a car. The employer purchases the base model, and the employee can upgrade or add features for a higher price, he said.

"A lot of health plans are saying all they can afford is the lower-cost plan," Isett said. "This type of plan at least allows the employees to buy up."

For Donald R. Neel, MD, a pediatrician in Owensboro, Ky., on the Indiana border, the plan sounds promising. With so few plans available to small businesses in the state now, most owners have no choice but to accept the rising premiums if they still want to provide insurance benefits.

"If you can custom-design your plan within your own group, that would be great," said Dr. Neel, who is immediate past president of the Kentucky Medical Assn.

While these products may be appealing to some physicians, they still are not widespread. Dr. Walker said defined-contribution products such as Anthem's are not offered universally in his state of Iowa. Meanwhile, the HMO plan his practice could switch to would be more restrictive than his employees would like.

"Our problem is when we choose a plan, it has to meet everybody's needs," he said.

Until more options are available, many physicians probably will have to make do. Dr. McFadden is trying to adapt by offering her employee a flexible savings account and covering some routine tests herself.

"It's not a solution," she said, "but at least it's a little bit of a help."