Employers face uncertainty over rising insurance prices

Nontraditional benefits more popular as companies try to contain costs

The large rate increases requested by Tennessee's largest insurers for the federal marketplace have many employers wondering if they can expect similar hikes for their group plans.

BlueCross BlueShield has requested the state approve a significant 19 percent increase for individual plans, while Humana requested a 14.4 percent increase and Cigna requested an increase of 7.5 percent, according to state documents.

The state must also approve rate increases for small group plans, where premium hikes look set to rise only a little less steeply: Aetna is requesting a 9.3 percent increase, BlueCross BlueShield is asking a 9.4 percent increase and Humana is requesting an increase of 11.6 percent.

"Those are fair numbers they're looking at," said Austin Madison, principal at The Crichton Group, a Nashville-based insurance agency. "Nine percent year over year has been the trend over the past three years. The challenge becomes looking at that from the employer perspective. That's outpacing inflation, and it becomes unsustainable."

But Madison said the rate hikes in the individual market could have downstream effects on employers offering either small or large group plans if regulatory agencies deny insurers' requests.

"Health insurance companies have real claims they have to pay for. Our concern is that the state is not going to allow these high increases to continue on the individual market, and the insurance companies will look to their commercial customers," he said. "They're going to have to drive those increases to that book of business, and to me, that's a real concern."

Large group insurance plans do not have to file rate increases with the state, but many expect increases in the 10 percent range there as well. However, large employers are increasingly shifting away from traditional insurance provisions in an effort to control rising costs.  There has been a "huge migration," Madison said, of traditionally insured employers becoming self-insured, in which companies contract with an insurer to manage their plan structure but are individually responsible for paying employees' claims.

"Self-insurance costs significantly less than paying to be fully insured, but the risk is higher," Madison said. "But if I'm self-insured, I don't care what happens on the individual marketplace, because BlueCross BlueShield isn't my insurance company. I am my own insurance company, and what they do does not financially impact me. So we're seeing a lot more employers ask those questions."

Another option for employers is to use the federal marketplace and provide employees a stipend of sorts with which to select their own plan and desired benefits.

"We've advised some employers to do that, but the challenge is budgeting when the premiums go up every year," Madison said. "When employers handle the insurance, they have some cost control and risk management in place. On the marketplace, I can't control costs, and if I don't increase my compensation, maybe my employee goes elsewhere."

The insurance companies have submitted their individual and small group rate increases, which would go into effect January 2015, with state officials. Following a compliance and corrections period, the deadline for final approval is Sept. 4.