How runaway costs can undermine health reform in a hurry
July 13th, 2007 by 
David E. Williams of the Health business blog
From today’s Boston Globe (Blue Cross to scrap policy with low employer contribution):
In an about-face, Blue Cross and Blue Shield of Massachusetts said it is scrapping a new policy that would have allowed owners of small businesses to contribute just one-third of the cost of their employees’ health plan premiums… Prior to the new policy… the insurer required a minimum 50 percent contribution to premiums from employers with 50 or fewer workers…
[Governor] Patrick’s administration believed that if Blue Cross allowed lower employer contributions, other companies might follow suit, sparking a race to the bottom in which employers contributed as little as possible to their employees’ healthcare.
Governor Patrick is concerned because the state’s health care reform law, which requires almost everyone to have insurance, depends heavily on employer coverage. If employers don’t keep paying up, the law won’t work.
But framing the discussion in terms of percent contribution is highly misleading. The “race to the bottom” comment is a case in point. Here’s what I mean:
- As I mentioned yesterday, Blue Cross plans to raise my company’s premium by 26.3 percent next year. Let’s imagine they do the same thing again next year
- Using approximate numbers, that means the family premium will go from $1000 to $1263 to $1595 over that time
- If the company paid 50% now, that would be $500. If the company continued to pay $500 in two years, it would only be paying 31 percent of the much higher premium!
- That’s not a race to the bottom, folks. It’s more like holding steady
I’m assuming our rate increase is unusually large, but we can’t be alone. If it happens like this to us in two years it will happen to everyone within five.
Cost issues have to be addressed, and quick.
Posted in Economics, Health plans, Policy and politics | 
9 Comments »
July 18th, 2007 at 8:52 pm
[...] Meanwhile, read this posting from David Williams’ Health Business Blog … 26.3% rate increase for David and his business from Blue Cross next year. This story is being repeated all over the state. Businesses of all shapes and sizes are getting socked with huge premium increases. All over the place. [...]
July 19th, 2007 at 3:29 am
David,
Thanks for this posting. Would love some more information about your rate increase (my sister’s company just got a 50% increase from BCBS). What reasons did you get from BCBS about why your rates were going up so much?
Best, Nancy
July 19th, 2007 at 6:07 am
Nancy,
I spoke to my BCBS agent yesterday to ask what’s going on. I was told that small businesses were seeing increases of 20% or so on average so mine wasn’t out of line. The only explanation offered was that we had gotten a little older and so had perhaps hit a new age bracket.
I did a few things as follow-ups:
It’s hard to understand exactly why costs are rising so much. I wonder whether BCBS –and maybe others– are trying to subsidize the costs of their new lower-priced plans prepared for the Connector by squeezing small businesses. It could be a good year to do it since no one wants to drop coverage the year it’s being mandated. Such large increases would also explain the introduction of the plans with low employer contribution.
In any case this seems like a bigger story than the one the Globe went with.
FYI I’m also going on a tour of hospitals in Singapore next week to gain insights on how they seem to achieve excellent quality at much lower costs.
David
July 25th, 2007 at 11:57 pm
[...] 2. Some talk about the cost crisis as though it only relates to health reform. Not so. Rising costs affect every element of society – not just those helped by health reform. David Williams at the Health Business Blog reports his business’ health premiums will rise 26.3% next year. Whether it’s a state, municipal, business, or family budget, the cost crisis affects you. Health reform is an asterisk in the bigger health cost picture. [...]
July 26th, 2007 at 10:59 am
[...] Sounds logical doesn’t it? But it’s hard to square with my 26.3 percent premium increase for next year, which coincides with the mandate’s phase-in. Am I supposed to believe that my increase would have been 30 or 40 percent otherwise? What does “lowers premiums overall” really mean in a market where premiums are rising rapidly for most everyone? [...]
August 1st, 2007 at 12:48 am
[...] David Williams of the Health Business Blog worries that rapidly rising premiums pose a risk to Massachusetts’ health reform plans. [...]
August 2nd, 2009 at 6:21 pm
Healthcare Reform–Let them eat cake?
Sunday, August 2, 2009
Health Care Reform–Let them eat cake???
Why are we not being told that the Congress has voted to establish their OWN PRIVATE HEALTHCARE PROGRAM. Yes, privately funded, not government. The plan is good enough for each and every one of us…but not for them??? Why is this not being blasted on every news program and in every newspaper in this country. When they set up social security, the congress voted themselves out of the system and established their own private retirement fund, then proceeded throughout these many years to decide how and what happens to our money. Now healthcare? History repeats itself because we allow it to do so.
Posted by Mad as Hell at 3:12 PM 0 comments
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Health Care Reform–Let them eat cake???
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August 7th, 2009 at 8:20 am
My individual plan was just increased by roughly the same 20%+.
November 10th, 2009 at 12:07 am
Hi,
Just new to here, just want to say hellow to every one.