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HEALTH CARE
Rising health insurance, malpractice insurance costs get passed on to workers
By Matthew French
Staff Writer
The health industry in 2004 saw trends in health care that could make 2005 a very expensive year for employers, physicians and patients alike.
Health care insurance costs—particularly those for small businesses—continue to rise, making health care more and more expensive for most employees. A recent survey conducted by the S. C. Department of Insurance found that, of the nearly 80% of South Carolina companies that employ fewer than 10 people, more than half do not offer group health insurance.
A report issued in September by the insurance department’s state planning grant staff found that more than one in five state residents under 65 are uninsured, and that there are more uninsured people and fewer small businesses offering health coverage to their employees in the Pee Dee and Lowcountry regions of the state.
“We found that insurance—or lack of it—is largely an affordability issue, as well as an availability issue,” says Ann Roberson, a spokesperson at the S.C. Department of Insurance. “We gathered the data and submitted the report to the governor who, in the last legislative session, enacted a health care commission. The commission is a five-member body who will look at what we put together [in the report] and determine what needs to be done to better the situation.”
According to a survey released in September by the Kaiser Family Foundation and the Health Research and Educational Trust, health insurance premiums increased 11.4% in 2004.
“The findings show that premiums increased anywhere from 10 to 18 percent, depending on whether the respondents came from a large group or small,” says Viki Fox, program manager on the grant that commissioned the survey. “We were really surprised by the types of businesses and correlating salaried people who were uninsured because they couldn’t afford it. There were a significant number in what we call the ‘professional’ fields.”
Many attribute the rising cost of health care to a slew of factors, including the rising costs of prescription drugs, new technologies, hospital expansions, an aging population and the added malpractice insurance many doctors are forced to carry given the multimillion-dollar payouts juries sometimes award plaintiffs in malpractice suits.
“More value is placed on health care than ever before and because of that, more is demanded from the health care system,” says Gwendolyn McGriff, the principal investigator for the survey. “The other problem is that people feel we live in a pill-will-take-care-of-it society, and educating people about a healthier lifestyle is the key.”
The outlook is not much better for the physicians themselves. The skyrocketing cost of malpractice insurance has made health care very expensive, as doctors have to offset the costs of carrying hundreds of thousands, if not millions, of dollars in liability coverage.
“Incorporating the cost of medical malpractice insurance has made it difficult to practice medicine in certain areas,” says Dr. John Heffner, medical director at the Medical University of South Carolina. “The overhead has steadily increased over the past five years while the margins have remained flat or even decreased. The added burden of malpractice insurance makes it difficult to work.”
Heffner says the connection between rising health costs and rising malpractice insurance has been an issue for a long time, but has only recently come to the foreground.
“As with all issues, when it gets to a critical point there comes a greater general awareness,” he says. “In some jurisdictions, it’s just become more apparent.”
Michael Fields, South Carolina director for the National Federation of Independent Businesses, says the health insurance industry is in a full-fledged crisis, and the cost of health care is rapidly exceeding many peoples’ ability to pay for it.
“South Carolina [doesn’t] have the proper competition to foster lower competitive prices,” Fields says. “We’ve seen a significant drop in the number of carriers over the past three years that cover small businesses and small groups. It’s just not profitable for them. It’s not a South Carolina-only problem, but it definitely is a problem here. Something has happened to make South Carolina unattractive, and we need to find out what that is.”
Fox agrees with that assessment, emphasizing the problem exists nationwide, not just in the Palmetto State.
“We have enacted laws to make it much easier for carriers to cover small groups compared to many other states, including our sister states,” Fox says.
The issue has created a buzz in Washington, and Fields says small business owners are just waiting for Congress to act. NFIB has proposed a nationwide allowance for small businesses to purchase health insurance in larger groups through associations, but to date there has been no movement on the issue on Capitol Hill.
“The government has nothing to lose here. There’s no federal money in this thing,” he says. “We might—just might—get it done next year, but it’s going to take small business owners standing up to be heard and Congressmen are going to have to stand up to the insurance companies. We have a shot at it, but it’s definitely a tough sell.”
Heffner says the increased cost of health insurance and the rising expenses of medical practitioners are related, and that the problem has been largely ignored for years.
“Health care expenditures are going up nationally and the costs are only now catching up with that growth curve,” he says. “New technologies and new medications are also feeding the increased cost in health care. We have a burgeoning pharmacy budget and are in the process of expanding our technology, and that’s quite expensive. The charges get passed on to the payers—insurance companies and businesses—who pass some of those costs on to the individual.”
Heffner says the increased cost of receiving health care could have an adverse effect on the health of the nation, as people turn to their physicians less frequently because of the cost of doctor’s visits.
New technologies save lives
Despite their cost, many hospitals are investing heavily in new technologies that help keep surgeon’s skills sharp and can assist in diagnosing conditions. Doctors can now train virtually and consult with specialists around the world by using “telemedicine,” the use of electronic information and communications technologies to provide and support health care when distance separates the participants.
MUSC’s Heffner says a shortage of physicians—specifically trauma surgeons and anesthesiologists—will require all hospitals to find alternate methods of care for their patients.
“Either way, we have to recruit an adequate faculty, especially in the specialty lines,” he says. “Last year we graduated hardly any trauma surgeons, and anesthesiologists are in very short supply. We need to figure out how to ramp up the training and ways to work around our diminished supply [of professionals] through technology such as telemedicine.”
Matthew French is a staff writer for the Business Journal. E-mail him at mfrench@crbj.com.
SIDEBAR:
SOUTH CAROLINA ranks as one of the unhealthiest states in the U.S.
According to the South Carolina Department of Insurance, the Palmetto State is one of the unhealthiest, ranking 46th in the nation. The department received a grant through a division of the U.S. Department of Health and Human Services to study the medically uninsured in South Carolina. The following results were found and reported for 2004:
– 19.4% of South Carolinians are uninsured.
– In 2002, uninsured South Carolinians cost the system $1,936 per uninsured individual.
– 60% of the uninsured are working citizens of South Carolina.
– 74% of the uninsured list affordability as the reason they have not purchased health insurance.
– 50% of eligible individuals do not enroll in public programs because they do not want to receive government support or don’t want the government to provide health coverage.
– 78% of businesses in South Carolina, excluding self-employed and government workers, have fewer than 10 employees.
– 53% of small employers with one to 10 employees do not offer group-sponsored health insurance to their employees.
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