Combating Rising Health Insurance Costs.

• Author: DARIN, BOB
• Position: Brief Article

Health insurance. Everybody needs it, but can anyone afford it? This year, health insurance premiums will increase by as much as 13 percent, up from a 12 percent increase last year, according to a 20001 survey by the management consulting firm Towers Perrin. While inflation, with information and careful analysis of your choices, you can better manage costs.

REASONS FOR RATE INCREASES

Prescription drug costs have risen by more than 20 percent a year for several years (compared to less than 10 percent for other healthcare services). Increases in pharmaceutical advertising have been exceptionally effective in creating consumer demand for the vast number of new drugs being brought to market.

Another cause of rate increases is that managed care may have reached its limits in reducing costs. Managed care kept things in check for most of the 1990s, but now costs have begun to rise again. Some health care providers have stopped requiring pre-authorizations on many procedures. While this may speed up treatment time, it also allows for expensive procedures to be performed with little or no review of the necessity and cost.

Also, providers are bargaining more fiercely for higher reimbursement rates from insurance carriers and these costs are passed to consumers. Yet another factor is that legislatively mandated benefits, while generating some improvements, have increased costs for all insureds.

Additionally, employers have been pressed to offer a variety of benefits to be competitive in the market and health insurance usually ranks high on that list. According to the Wall Street Journal, employers have given in to workers' demands for freedom in choosing doctors and medical services and as a result, often absorb the rising costs themselves to try and retain key employees.

WAYS TO COMBAT RISING COSTS

Though daunting, the situation is not hopeless. The first step is to be a smart shopper. Several competing health insurance companies exist and offer a variety of plan options, so check the premiums available across carriers. However, be careful not to always buy the cheapest plan; this may leave you with insufficient coverage.

Review prescription drug coverage, which varies widely with the level of coverage. Many health plans are promoting the use of generic drugs (chemically identical to brand name drugs, but significantly less expensive). Also, depending on your employees' health needs, you may be able to choose a plan that has higher copays and...