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Health insurance: evidence of positive changes in the marketplace.

Every year, Hawaii employers ask themselves: "Can I afford the medical plan I'm offering to my employees?"

The question is a fair one but the health-insurance marketplace has changed recently. State of Hawaii insurance commissioner J.P. Schmidt listed steps taken by the Insurance Division to stimulate competition into the Hawaii marketplace.

Two years ago, the filing of health-insurance rates with the Insurance Division's Health Branch became law, and all carriers must now substantiate their rate increases. Members of Kaiser Permanente were the first to benefit from a reduction in their 2004 proposed renewal rates. According to Schmidt, this law also had the unexpected, positive effect of attracting competition into the marketplace.

Health-insurance rates aside, health-plan designs have affected their costs. In the past, some carriers have mirrored the most prevalent plans in the marketplace. Recently, the Insurance Division, Hawaii Department of Labor and the Pre-paid Health Care Council, scrutinized the wording of the Pre-paid Health Care Law. All agreed that "reasonably and medically equivalent to the prevalent plan" did not mean a proposed plan had to be identical to the prevalent plan. This review of the law and subsequent agreement by our governing divisions have allowed a broader spectrum of plan designs to be considered suitable for Hawaii employees.

Now, with a more stable, regulated playing field, Summerlin Life & Health Insurance Company has entered the Hawaii marketplace. Recent history verifies that competition motivates all carriers to sharpen their underwriting pencils.

In the mid-1990s, Hawaii employers had a variety of health carriers from which to choose. This competition contributed to rate decreases. Unfortunately, the for-profit carriers were competing against nonprofit carriers. The disparity created by the for-profit tax charge worked against these carriers and contributed to the eventual disappearance of broad competition in Hawaii.

Summerlin is testing this new perspective and has presented plans with higher co-payments and deductibles, offset by extended coverage in other areas. Schmidt is hoping that this slight shift in financial responsibility for health services will result in smarter usage of the plan by its members, a better claims experience and more attractive rates for everyone.

What I have described so far are methods that insurance carriers and state government have already implemented to slow down the rise in health-insurance costs. These methods focus primarily on the technical and financial aspects of the problem.

The Hawaii Business Health Council (HBHC) is a consortium of employers dedicated to identifying solutions for the current health care crisis. Gary Allen, executive director of HBHC, is targeting an important factor in the health care equation--changing consumer behavior. According to Allen, employer premiums are determined by how much the employees consume in health care resources.

It stands to reason that if you are dedicated to building a healthier work force, your premiums will go down over time. Benefits that improve the health of your employees usually equal to higher levels of production.

Allen also described an employee wellness program alternative that many companies are implementing today, one that provides health care incentives for employees.

Studies have proven that if you provide financial incentives to employees to change unhealthy lifestyles, they will. The return on investment, if correctly designed, is as much as five to one, or 500 percent. This approach is being piloted by a few member companies of the HBHC. Allen says that health care premiums in the past five years have increased almost 60 percent and will double every seven to eight years if this trend continues. Taking action is crucial to slowing this trend.

Increasing the efficiency of these health-care providers is another dimension to cost containment. The HBHC has been working with the Quality Healthcare Alliance (QHA) to design and build an integrated, state-of-the-art, health-information network. By improving connectivity, QHA's goal is to provide access to timely, reliable health information, which will increase efficiencies and lower costs.

The task of controlling the rising cost of health care is daunting. However, if private industries, government and employees support the efforts of insurance carriers and business organizations, an affordable health plan will be commonplace.

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Title Annotation:bank on it
Author:Aragaki, Anna
Publication:Hawaii Business
Geographic Code:1U9HI
Date:Dec 1, 2004
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