Health Savings Account Blog

This year, large companies and their workers are expected to pay about 10 percent more for coverage, while small businesses will see rates soar 20 percent or more, analysts and insurers say.

Major health insurer Humana Inc. this month is rolling out what is believed to be one of the first plans to cap rates for more than one year. It's trying the idea out in a handful of markets, including Chicago, and focusing on small businesses. The company said it hopes eventually to expand to big employers.

In Chicago, Humana is introducing a plan for businesses with 51 to 99 employees called "No Worry," a health insurance package that caps premium increases for three years at 6 percent annually, or 4.5 percent if businesses also choose a Humana dental plan and agree to certain other terms. In exchange, deductibles can rise from $500 to $2,500 depending on the products being offered.

"This program is for that group of employers that every year they are getting that 18 to 19 percent increase, and they cannot handle it anymore," said Jerry Ganoni, president of Humana's small-business and HumanaDental products. "(Businesses) want predictability, a long-term solution to rising costs and a hassle-free process. The rate increase cap ensures predictable health benefits costs, enabling more accurate budgeting and long-term financial planning for small businesses."

Humana's rivals say they are not planning to copy the Louisville-based insurer's multiyear caps but say they are marketing more plans that can slow premium rate increases by directing consumers toward high-deductible health plans much as Humana is doing.

Known as consumer-driven plans, a health plan member might pay the first $1,000 to $2,500 or more per year of his medical expenses, often drawing from an attached health savings account to put toward his deductible.

Other companies say they are not ready to cap rates for multiple years but have been able to keep rate increases lower than in years past because high-deductible plans have slowed the growth of premiums.

But if interested consumers and employers don't read the fine print on these multiyear plans, there could be reason to worry, say industry analysts and some critics among medical-care providers.

For one, out-of-pocket costs with some plans can rise significantly during the three-year contract, with deductibles doubling or even quadrupling.

Some, including Humana's rivals, wonder whether the health plan participants will see true savings if the out-of-pocket costs rise.

"It's very easy to cap renewal increases if you are going to substantially reduce benefits," said Pat Boughey, president and general manager of Cigna HealthCare Illinois, a subsidiary of health insurance giant Cigna Corp. "I am not sure what benefit that provides to an employer in the long run."

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