Health insurance industry consolidation, cost increase and creativity in product design are all in the headlines for the new year 2005.
The nations biggest private sector health payors continue to consolidate with the largest payor controlling over half the market in 16 states and a third or more of the market in 38 states, according to UC Berkley Professor James Robinson. The big WellPoint/Anthem merger closed in December of 2004, and the major national payors (United HealthCare, Cigna, Aetna, and the Blues) continue to dominate the market. The rise in health insurance costs slowed in 2004 with employers nationwide paying 7.5% more for coverage, according to an annual survey by Mercer Human Resources Consulting. The cost shift to employees and moderation in the surging health insurance profits of recent years contributed to the slowing growth in medical care expenses. The jump in absolute dollars still remains large with costs rising from $6,215 to $6,680 per employee per year. South Florida may be an exception to the national trend, as AON Consultings annual survey on South Florida employers showed health insurance coverage costs will be rising at a 13% clip. Recent survey data shows little difference in terms between HMOs, Point of Service plans, PPOs and other more creative forms of health care benefit coverage. All product costs are up. Employers are shifting costs to employees with higher deductibles, co-payments and out-of-pocket maximums, and increasing use of defined contributions, where employers only provide a fixed amount for the monthly premiums, with employees having to pick up the increase in premium charges. Most observers expect an increase in use of consumer-directed health plans, usually high deductible plans with a tax exempt health care spending account. As the population ages and advances in medical technology continue, health benefit payors and health care service providers must continue to be creative to make the business components of health insurance.
