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Rising premium costs getting 'really scary' for Utah small business

Monthly premiums rose on average by a third in Utah since 2006

SALT LAKE CITY — When WaveOrtho started offering health insurance benefits to its employees in 2010, the costs were manageable.

And as workers' monthly premiums crept up for another year or two, Nick Meecham, chief operating officer for the small software development company that serves orthodontists, thought nothing of it.

"Every year before rates started going crazy, our plan person would come back and tell us, 'Your rates have gone up 1 percent,'" Meecham said. "We were like, 'OK, great.'"

Heather Tuttle

Now, though, he said, the North Ogden-based business with 10 employees is forced each year into a time-draining decision-making process over how to dodge the runaway train of soaring premium costs.

"After rates started really going up every year, we (now) have to spend probably 20 to 30 hours of researching, in one month, all of the different options," Meecham said. "We do spend a lot of time once a year trying to find the best option."

WaveOrtho's plight is not unusual. Monthly premiums charged for employer-sponsored health plans rose on average by about a third from 2006 to 2016 in Utah, according to an extensive analysis released this week by the Utah Foundation.

Compelled to switch insurers multiple times over several years in a search for the best deal, OrthoWave even tried paying an allowance to employees in 2015 that they were to use toward coverage they would purchase on the individual federal health exchange, Meecham said.

Not satisfied with that option, the company switched again to directly paying for employees' insurance benefits in 2016, and had to switch their carrier once again this year.

Despite its money-conscious tap dance, WaveOrtho and its employees are now paying a combined $1,360 per month for health coverage, compared to $670 each month as recently as 2013. (The company pays half of that monthly premium and employees are responsible for the rest.)

"It's just costing our company more and more," Meecham said, affecting the take-home pay of employees. "It's really scary, as a small business … that it's just out of control."

Utah businesses are taking the brunt of premium increases more so than workers themselves, according to the Utah Foundation, a nonpartisan policy research nonprofit.

Drawing from federal data, the Utah Foundation reported the annual premium payments that employers make on behalf of their workers in family plans jumped from an average of $9,050 in 2006 to $13,059 in 2016, an increase of 31 percent. Workers paid an average of $3,116 in 2006 and $3,966 in 2016, a jump of 27 percent.

For individual plans, insurance premium payments rose an average of 38 percent for Utah employers and 18 percent for their workers from 2006 to 2016.

"Those are some pretty substantial cost increases for Utahns," said Sam Brucker, a research analyst for the Utah Foundation and the author of the report.

Rising costs among employer-sponsored plans are pertinent for about 61 percent of Utahns, the proportion of the state's residents who get their health insurance via their job — a figure the Utah Foundation says is highest in the country.

A large number of Utahns have employer-sponsored insurance because of a comparatively small elderly population in the state using Medicare, as well as "a fairly robust middle class" of workers with jobs that offer medical benefits, Brucker said.

"It's kind of a mix of both the demographic makeup of the state and the economics of the state as well," she said.

The Utah Foundation says in 2016, about 12 percent of Utahns had health insurance through Medicare, 10 percent through Medicaid, 8 percent through the federal health exchange or off-exchange individual coverage, and 9 percent were uninsured.

In his own experience, Meecham said, rising premiums can directly interfere with business growth because of their effect on finances.

"The (number of) software developers you can hire really determines how quickly you can grow your business," he said. "Because the quicker you can add new features to your software, put out new versions of your software … the more clients you'll bring in.

"So if our insurance rates were only slowly increased ... that's one more employee we could hire. We could push out products much faster."

Courtney Bullard, education and collaborations director for the Utah Health Policy Project, said a significant underlying reason for the high cost of insurance is the rising cost of care itself.

And the cost of care across the United States is fundamentally driven higher due to lack of transparency over complex pricing models that are hard for even high-powered insurers or providers themselves to decipher, she said.

"As a consumer who perhaps doesn't have as many resources or know how to work the system, it's nearly impossible to get any transparency on cost of services," Bullard said.

High-deductible plans

A major shift to high-deductible coverage has likely prevented employer-sponsored premiums in Utah from climbing even higher in recent years, according to the Utah Foundation. Ten times as many Utahns had high-deductible health plans in 2016 compared to a decade prior, the organization says in its analysis.

"The average deductible has nearly doubled in the last 10 years for both individuals and families," Brucker told the Deseret News.

The number of total high-deductible health plans in Utah soared from 3 percent in 2006 to 30 percent in 2016, with most of that increase attributed to the changing landscape of employer-sponsored plans, according to the report.

The federal definition of a high-deductible health plan — for which enrollees can qualify to contribute to a tax-exempt health savings account — is one with a $1,350 deductible for an individual or $2,700 for a family.

In the face of rising premiums, Brucker said, "employers (which) are sharing the costs of the health insurance plans with the employees … also want to keep their costs down." She said businesses have discovered how to keep their monthly contribution and that of their employees under control by yielding to higher deductibles.

"The increases in premiums aren't quite as high as they've been in the previous two decades … for precisely that reason," Brucker said.

However, the trade-off for enrollees is that they are expected to pay a greater share of their out-of-pocket health costs up front before receiving benefits. With an increasing number of businesses raising their workers' deductibles, Meecham said WaveOrtho is reluctant to do so, but also doesn't have the luxury of ruling it out in the future.

"We could go to a $5,000 deductible and save some money, but we feel like we don't want to take things away from our employees," he said. "If it keeps increasing, we may need to do that next year."

Paying for exorbitantly expensive coverage versus risking high deductibles are two less-than-ideal alternatives for businesses trying to do the right thing for their employees, according to Bullard.

"Sometimes the plans that are most affordable to small businesses aren't the most effective for consumers," she said. "But (otherwise) the cost for small businesses, it's huge."

On average, the Utah Foundation report said, Utah workers who are employed by large companies pay more in monthly premiums than those who work for small businesses.

"While small firms generally offer lower premium rates, this is likely because the plans come with limited health benefits and higher deductibles," the report states.

The Utah Foundation compiled its report using health care affordability data from numerous sources in response to the results of its 2016 Utah Priorities Project survey, which identified health care affordability as the most important policy issue to Utahns.