Health Insurers to Limit Premium Hikes, Experts Say

Responding to pressures from consumers, employers and the Clinton Administration, the nation’s health insurers are planning to curtail increases in premiums sharply next year, according to industry analysts.

Health maintenance organizations are raising premiums by an average of 5.6% next year--down from 8.1% this year and the fifth consecutive year of decline, according to a study by the Group Health Assn. of America, a trade group.

Premiums for traditional indemnity health insurance are also expected to rise more slowly. While there are no available nationwide statistics for those plans, experts predict an average premium increase of about 12% next year--also below the previous year.

To many experts, these trends result from a shift in market forces as well as the insurance industry’s effort to placate critics in Congress who are currently writing legislation to reform the health care system.

The shift is almost certain to be cited by various factions in the looming health care reform debate. Advocates of a strong government plan, like the one proposed by the Administration, can argue that the decline shows the positive influence government can have over the health care industry.

Those who oppose a central government role in health care, however, can point to the figures as proof that market forces and the industry itself will keep costs in line. They can also note that the decline in annual increases began five years ago, long before health care reform became a national issue in the 1992 presidential election.

The slowing trend was especially apparent here in the capital of the insurance industry, where Blue Cross & Blue Shield, Connecticut’s largest health insurer, filed a rate request seeking increases averaging 3% to 4% for groups with more than 50 employees.

In California, Kaiser Permanente announced its premium increases would average 4.1%.

William Custer, health care economist for the Employee Benefits Research Institute, credits Administration “jawboning” about health care costs for causing both the industry and consumers to be more cost-conscious.

“You can be cynical and say that the insurance industry is running scared,” Custer said. “But it’s also raised the consciousness of consumers. They are being jawboned as well.”

John Kleiman, health insurance industry analyst for the consulting firm of Conning & Co. in Hartford, said many insurers are aware that the double-digit increases of the past have spawned an outcry from consumers, employers and politicians--leading to the movement for health care reform.

“That’s got to be in the back of everybody’s mind,” he said.

The Group Health Assn. of America also announced that enrollment in HMOs increased by 3.5 million people over the past year. HMO enrollment is now at 45 million, and the group predicts that it will reach 50 million by the end of 1994--a reflection of the number of people who are shifting away from indemnity plans.

The trend toward lower-cost HMOs is likely to further dampen health care costs in the years to come, according to Kleiman.

Consumer groups, which welcomed the news of smaller premium increases, said the insurance industry is responding to the Administration’s threat to regulate insurance premiums in the future.

“Health insurance prices were like a semi-truck barreling down the interstate,” said Ed Rothchild, spokesman for Citizen Action, a national consumer organization. “Then it was as if they saw a cop sitting by the road and they slammed on the brakes.

“All of a sudden, lo and behold, after years and years of double-digit increases, health insurance premiums are coming to a screeching halt or, at least, just going five miles over the speed limit in hopes of not getting caught,” he said.

In recent years, insurance premiums--like most health care costs--have been running far ahead of inflation, often far into double-digits. Total health insurance premiums more than doubled in the last decade, from $95 billion in 1980 to $215.6 billion in 1989, according to a study by the Health Insurance Assn. of America.

The lower increases planned for 1994 are the result of a slowing trend that began several years ago. According to Group Health Assn. of America statistics, HMO premiums, which are consistently lower than those for indemnity plans, rose by 16.9% in 1989, 16% in 1990, 12.9% in 1991, 10.6% in 1992 and 8.1% this year.

Tom Billet of Foster Higgins, a New York-based employee-benefit research organization, said he has found ample evidence that premium increases for HMOs and indemnity plans are declining “in line with the downward trend we’ve seen in recent years.”

According to a Foster Higgins survey, increases in employer costs for health care benefits peaked in 1988 at 18.6%, and they have been declining gradually ever since to reach 10.1% last year.

Health insurance is regulated by states, and many require insurers to report their annual rate increases before the start of the new year. This state-by-state reporting system makes comprehensive nationwide statistics impossible to acquire.