Montana employers takes creative steps to combat rising health costs

Jan Falstad

Nov. 8, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- In April, St. John's Lutheran Ministries and its workers absorbed a 10.5 percent annual premium increase for health insurance.

Then, on Nov. 1, St. John's and many other regional companies were hit with a second premium hike ranging from zero to 70 percent from Billings-based Associated Employers of Montana.

After the recession hit last fall, AEM's health costs increased dramatically and it was forced to impose a midterm premium increase. St. John's share was 35 percent.

So, St. John's Chief Executive Kent Burgess decided it was time for radical action: hire a doctor.

"We are going to move quickly to establish a free, primary-care clinic on our campus, available to our health care employees and their enrolled dependents," Burgess said.

By March, Burgess hopes to have two exam rooms set up and a primary-care doctor, physician's assistant or a nurse hired to help keep St. John's employees healthy. Then, by mid-2011, he'll ask for a break on premiums.

"My goal is 18 months later to have lowered claims such that Associated Employers of Montana can give us a discount on our premiums," he said.

Like auto or home insurance, the more health care claims filed, the higher the premiums.

"All plans are seeing increased utilization because of an overwhelming fear, initially, of job loss and benefits being tied to jobs," AEM President Diane Ruff said. "Now, secondarily, there's a new wave of not knowing what is going to happen to them with health care reform."

AEM is a major player in Montana and Wyoming, where 400 companies pool their premiums and share the costs of health care for 6,000 employees and 7,000 dependents.

The company has been offering health insurance for half a century and has been self-insured since 1991.

An independent actuarial study found that AEM's medical claims had jumped by nearly one-fifth since last fall. The claims were eating into AEM's reserves.

Even after these twin increases, AEM said its premiums are still competitive because they have been below market for years.

That claim is borne out by Paul Cox, president and one of the owners of Sign Products of Billings, which received a maximum 70 percent premium hike.

"We are at the high end, so we got some comparable bids. We haven't gotten them all back, but the ones we did are a little higher than AEM is, even with the 70 percent hike," Cox said.

Breaking the news\n

After the midterm increase decision was made, Ruff said she and the board members personally contacted 80 percent of members by telephone or in person to tell them of the changes.

"It was an extremely gut-wrenching situation for all our trustees and our staff to go to talk to people and tell them the decision that had been made regarding the trust and the midyear increase, which we had never done before," Ruff said.

AEM pays Employee Benefit Management Services of Billings a modest 6.5 percent to run the health care fund and has no six-figure executive salaries like some insurance companies, Ruff said.

State Auditor Monica Lindeen met with AEM officials Wednesday to discuss the recent rate hike.

"I'm sitting down with members of their board to discuss how this agency can help them find solutions that will be equitable and fair to all their members," she said.

AEM is a Multiple Employer Welfare Arrangement company, meaning it is regulated less by the state than traditional health care insurers.

But increased health care costs are a shared concern in Montana.

For the year ending June 30, Blue Cross Blue Shield of Montana's monthly premiums increased 2 percent, Allegiance Life and Health Insurance Co.'s rose nearly 5 percent, and New West Health Care premiums were 12.5 percent higher, according to the Auditor's Office, which regulates insurance. That looks good against a national average of 10 percent to 12.5 percent per year. But trends appear to point toward larger premium hikes in the near future.

AEM also made another major midterm change.

Instead of raising rates across the board Nov. 1, AEM grouped its members into five tiers where the companies filing the most claims paid the highest premiums.

Many of St. John's 642 workers are part time and only half of them buy into the health insurance pool. For a $500 deductible, an employee's cost rose from $39 per month to $126 per month, an $87 increase. That would have been unaffordable for some employees, so Burgess set up a new, more affordable option.

For employees willing to take on the increased risk of a $1,500 deductible, premiums will cost $56 per month.

Contracted doctors\n

The contracted doctor that St. John's plans on hiring is a new concept for the campus but not for Billings, as companies try to step off the health care grid.

In April 2006, Employee Benefit Management Services of Billings set up a free, in-house clinic for its 250 employees, and Roscoe Steel and Culvert recently started sending its employees to this clinic.

EBMS Vice President Judi Kimmel said the clinic has cut her company's annual increase in medical costs from 9 percent to less than 2 percent.

"And we've had no premium increase going on our third year," she said.

Two years ago, the Laurel School District set up a twice-a-week clinic through EBMS.

"The clinic costs are cheaper than the market and the drugs costs are, too," said Laurel School District Business Manager Roger Heimbigner. "We're hoping it will save us a lot in the long run. And it helps us with absenteeism because employees don't have to take half a day off to go to a doctor's appointment."

The city of Billings also is self-insured, spending $9.7 million per year on medical benefits. In September, officials asked the City Council for an extra $300,000 to cover rising medical claims. Last year, the city decided to dip into reserves to cover expenses, which can't continue, said Finance Director Pat Weber.

"When we get to 2010, we'll have to have a premium increase," Weber said.

School District 2 Superintendent Jack Copps said medical expenses last year increased just 2 percent in the district. But on July 1, the school board had to budget an additional 12 percent to cover medical costs that started rising last fall.

This U.S. health care cost squeeze comes on top of other economic strains, said Paul Bogumill, who directs benefits for the Montana University System.

"All those people are told, 'Be happy you've got a job,' " he said. "Then they get no raise, and then you hit them with a benefits hike, and their pocketbook health just deteriorates."

If the free clinic at St. John's can be set up and it succeeds in keeping employees healthier, they will use fewer other medical services, and that should help moderate future premium increases.

As a self-funded plan, AEM has more discretion to offer premium breaks. But there is a disconnect in the U.S. health care industry, Burgess said, because savings aren't necessarily returned.

"But we had to do something," he said. "Utilization drives rates, and if we save money for the system, the system needs to reward us for that."

Contact Jan Falstad at jfalstad@billingsgazette.com or 657-1306.

Newstex ID: KRTB-0032-39554872