Before everyone stuffs away their Newsflex health insurance paperwork for the year, it’s worth reviewing a big change that may have gone unnoticed. Follow along because the change has important implications for your health benefits and wages in the future.
Under the terms of our current contract, The Buffalo News in 2008 switched to one health insurance company – Blue Cross and Blue Shield of Western New York – to cover members of The Buffalo Newspaper Guild and their dependents.
In addition, we switched from a community-rated to an experience-rated health insurance contract. This means the premiums charged by Blue Cross Blue Shield are based on our medical experience – how often we use services and the cost of those services – rather than on the overall medical costs in the community.
The health insurance companies that submitted competitive bids to The News to cover The Guild offered experience-rated contracts priced much lower than what The News had previously paid for insurance. For The Guild and The News, the move to an experience-rated contract was a way to maintain employer-provided health insurance by reducing its cost. Moreover, the insurers told us it was the right thing to do based on our past medical usage and demographics.
An agreement with Blue Cross Blue Shield, the lowest bidder at the time of negotiations, called for premiums to increase over the first two years of the contract at a guaranteed rate close to 12 percent a year. Afterward, premium increases would increase based on our medical experience.
Dan Farberman, vice president of human resources at The News, reported to The Guild that when Blue Cross Blue Shield this fall announced its increase for 2010, it was a 33 percent hike. In the surreal world of health care, a rate increase of about 12 percent is considered hefty. But it has become so common over the years that the shock has worn off. A 33 percent increase is an astounding jump and represented a huge, unexpected expense to The News.
News management sought The Guild’s blessing to ask other insurers to rebid on the business and alerted the Blues that 33 percent was unacceptable. The company also set up a meeting with Guild representatives for Blue Cross Blue Shield officials to explain the increase. How is it possible that our medical costs skyrocketed by that much? The short answer is that the health insurer could not justify a 33 percent increase.
Here are a handful of statistics Blue Cross and Blue Shield shared with us for the period Feb. 1, 2008 to Jan. 31, 2009:
- Our costs for hospital care and outpatient treatment were significantly lower than benchmark levels Blue Cross Blue Shield uses to measure how an experience-rated group compares to others.
- Our average cost to see regular doctors was above the insurer’s benchmark, but that’s considered a good thing. It means we are getting annual checkups and not waiting for small problems to grow into larger, more expensive medical issues.
- Our use of prescriptions is average, and we do a good job of substituting generic drugs for more expensive brand name medications. Nearly 24 percent of Guild members buy their drugs through a lower-cost mail pharmacy service. Blue Cross Blue Shield officials said they typically see a usage rate of about 12 percent.
Blue Cross Blue Shield eventually lowered the increase from 33 percent to 19 percent, according to Farberman, who reported that further prodding by The News got the increase down to about 17.5 percent. Independent Health, the only insurer interested in bidding again to cover The Guild, was close but could not offer a lower premium price. So, The News is continuing with the Blues.
Here’s the main point: Health care costs are exploding, yet there is little significant headway being made to control the costs. The methods for determining health insurance premiums seem arbitrary and negotiable, and it is becoming more difficult on our end to find ways to cut costs. Study after study confirms the health system is plagued by unnecessary treatment, inefficient practices and inconsistent quality, yet private insurers and the government seem incapable of reining in these problems.
All this is playing out as the newspaper industry struggles to survive.
It’s not clear if the health reform measures under discussion in Washington, D.C., will control health insurance costs. Some of the proposed strategies look promising, but require Congress to make difficult decisions in the future and take effect years from now.
The News must cover premium increases in our base-option health plan through Dec. 31, 2011, when the health insurance portion of our contract expires. But we all pay for a dysfunctional health system in the long run. Skyrocketing health care costs bear directly on employer expenses and employee wages.
This inescapable fact will confront us once again when we sit down with The News to bargain a new contract in 2011. This is why it’s vitally important Guild members stay involved, even in the years when there are no negotiations, to ensure that we are positioned as best as possible to meet these challenges.