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ARCHIVED  June 4, 1999

Premium hikes plague employers

Health care premiums for some employers in Northern Colorado have climbed by as much as 25 percent this year due to the lack of competition among hospitals in the area, health care managers say.

Some health maintenance organizations artificially held down premiums in this region in recent years to stay competitive. But now, officials say they have had to raise rates to more accurately reflect the cost of medical care.

Blue Cross Blue Shield of Colorado began a series of rate increases last July, upon renewal of policies, that affected both small and large groups. However, it was the first major increase in premiums for Blue Cross in three years, a spokeswoman said.

Karen Morgan, director of Blue Cross’ Northern Colorado office, said rates went up by 25 percent or more for some employer groups depending on the age mix of employees and other factors.

The cost of health care in this region, particularly Fort Collins, is higher than in Denver or Colorado Springs, where the communities have more than one hospital, she said, adding that with competition, health management companies can negotiate better rates for medical care.

But, because Fort Collins has only one hospital, premiums are higher here, Morgan said.

“What people are experiencing is that they’re having to pay the cost of care,” she said.

Rulon Stacey, chief executive officer of Poudre Valley Hospital in Fort Collins, said insurance carriers’ claims that the hospital’s rates result in higher insurance premiums is silly.

“Premiums are going up throughout the state,” he said. “In Yuma, they’re up 70 percent. They’re up in Denver, Alamosa and Grand Junction. It’s just an awful convenient thing for them to say.”

He pointed out that Poudre Valley Hospital’s billed charges are 22 percent lower than other hospitals in Northern Colorado and 28 percent lower than other hospitals throughout the state.

In large cities such as Denver, carriers can negotiate discounts with hospitals because they deliver exclusive access to a high volume of patients, Stacey said. But in Fort Collins, they don’t have the volume of members and are unable to make comparable deals to get discounts, he said.

“They want lower rates from us but aren’t able to provide the same services to us,” he said.

Dr. Michael Paddack, medical director of PacifiCare of Colorado Inc. in Fort Collins, concurs with Morgan that the lack of hospital competition has forced health care companies to increase their rates and said many health care companies have held down their premiums artificially in the last few years to keep up with competition.

In past years, small employers in this region have been subsidized somewhat by premiums from Denver, where hospital costs are lower, he said. But this year, PacifiCare decided to let each region carry its own weight and stopped the practice of allowing one area to subsidize another.

The actual cost of hospital care, along with increases in the cost of prescription drugs, have driven up premiums in this area by about 25 percent, he said.

Paddack noted that pharmacy costs have climbed about 15 percent a year in recent years.

“It’s something we don’t have a lot of control over,” he said, adding that the large number of new drugs coming onto the market and direct advertising to consumers to create demand for those drugs has helped push up costs of prescription drugs.

One small employer in the area said he has seen his company’s health insurance rates increase by as much as 20 percent in recent years.

Fred Morey, president of Loveland Travel Agency Inc. in Loveland, said he has continued to see increases in premiums in the past few years.

His travel agency has nine employees. Last July, he switched from HIS Health Plans Inc. to United HealthCare of Colorado Inc. Blue Cross Blue Shield had acquired HSI, and Morey was concerned that the company’s rates would be higher.

He said he had been with the previous health care company for five or six years.

“Typically, we try to stay with them for a few years,” he said.

Morey said he worked with a broker last summer to shop around for cheaper health insurance rates for his company.

Linda Admussen, owner of Alternative Mortgage Source in Greeley, which has three employees, said her company saw a 60 percent increase in health care premiums in the last year.

“We stayed with them because it’s excellent insurance,” she said of her carrier. Also, other insurance carriers offered plans at about the same price as the increased cost from her current carrier, she said.

In Berthoud, Rapid Production Tooling has seen its health care rates climb as much as 20 percent in the last couple of years, said general manager David Thomsen.

The company, which has 27 employees, has switched carriers to keep down rates, he said.

“We were able to offer our employees the same benefits,” Thomsen said. But, he added, it appears as if the company will have to switch carriers regularly to keep down the premiums each year.

“It’s more time-consuming, but we’ll have to do it,” he said.

Health care premiums for some employers in Northern Colorado have climbed by as much as 25 percent this year due to the lack of competition among hospitals in the area, health care managers say.

Some health maintenance organizations artificially held down premiums in this region in recent years to stay competitive. But now, officials say they have had to raise rates to more accurately reflect the cost of medical care.

Blue Cross Blue Shield of Colorado began a series of rate increases last July, upon renewal of policies, that affected both small and large groups. However, it was the first major increase…

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