A Health Care System in Critical Condition:
Evidence of the Declining Affordability of Health Care
Insurance and the Erosion of Health Care Infrastructure
in West
Gregory R. Thorson
Associate Professor of Political Science
University of
Tara Schmidt
Political Science Major
University of
This survey was made possible by financial support from
Prime West Health System, the West Central Regional Sustainable Development
Partnership, the
Executive Summary
During the winter of 2002-03, business owners, farmers, local governmental representatives, insurance agents, and health care providers came together at four public forums held in West Central Minnesota to discuss the problem of rapidly increasing health care insurance costs. At those meetings, area employers expressed frustration both with the limited number of health care insurance options available to them, as well as the cost of the plans. A summary report of the forums was published in early 2003 and is available at http://www.insureruralminnesota.org.
As a result of the public forums, a steering committee was formed to further examine both the interest and the viability of forming a health care purchasing alliance in West Central Minnesota. For those new to the concept, a health care purchasing alliance (HCPA) is a coalition of employers who pool their purchasing power in order that they may collectively negotiate better rates and better features in their employer-sponsored health care plans.
To determine the interest and viability of forming a health
care purchasing alliance in the region, two surveys were administered within
the 12-county area of
Some of the most important findings from the surveys include:
1) More than four-fifths (82.9%) of employers in the region believe that offering health care insurance is either very or somewhat important in attracting new employees. An even larger percent (84.5%) indicate that it is either very or somewhat important in retaining their existing employees.
2) Just under half of area employers (48.8%) offer health insurance benefits to their full-time employees. Only 13% of employers offer health care insurance benefits to their part-time employees.
3) On average, employers in the region experienced 15% increases in their health care insurance premiums in the past year.
4) These steep increases are threatening the ability of area employers to continue to offer health care insurance to their employees. An alarming 55.3% of employers indicated that they are either very or somewhat likely to drop health care coverage for their employees if premiums continue to rise at their present rate. In fact, more than one in ten employers (11.1%) has already discontinued offering health insurance to their employers in the past five years.
5) A large majority of area employers are either very or somewhat dissatisfied with both the number of health care insurance options available to them (72%) and the costs of these plans (88%). When asked if they were offered a plan by the West Central Health Care Purchasing Alliance that was competitively priced, had caps on premium increases, and required a 3-year commitment, more than 8 in 10 employers (81.4%) indicated that they would seriously consider purchasing it. 82.5% of employers asked to be contacted about future developments with the West Central Health Care Purchasing Alliance.
6) Area health care providers are also under extreme stress. While the median expense inflation increased by an average of more than 5% for area providers this past year, 75% of area health care providers reported flat or lower reimbursement rates from insurers. As a result, nearly half of area providers (48.4%) reported that they are less financially stable due to recent trends in reimbursement, while 63.3% of area health care providers indicated that the reimbursement trends are threatening their viability as a health care provider in the community.
7) Support for the formation of both a health care purchasing alliance (HCPA) and an Accountable Provider Network (APN) were strong among our area health care providers. 96.7% of area health care providers were either very or somewhat interested in forming an APN, while 95.8% of area providers supported the formation of a health care purchasing alliance in our region.
In summary,
we conclude that there appears to be both a
significant need, as well as significant interest in our 12-county region, in
forming a health care purchasing alliance.
Background:
During the winter of 2002-03, business owners, farmers, local governmental representatives, insurance agents, and health care providers came together at four public forums held in West Central Minnesota to discuss the problem of rapidly increasing health care insurance costs. At those meetings, area employers expressed frustration both with the limited number of health care insurance options available to them, as well as the cost of the plans. A summary report of the forums was published in early 2003 and is available at http://www.insureruralminnesota.org.
As a result of the public forums, a steering committee was formed to further examine both the interest and the viability of forming a health care purchasing alliance in West Central Minnesota. For those new to the concept, a health care purchasing alliance (HCPA) is a coalition of employers who pool their purchasing power in order that they may collectively negotiate better rates and better features in their employer-sponsored health care plans.
The formation of health care purchasing alliances was made possible by the Minnesota Legislature in 1997 through the passage of the Community Purchasing Arrangements Act, commonly referred to by its legislative chapter number 62T. Subsequent amendments to 62T allow health care purchasing alliances to contract directly with area health care providers, who would then collectively organize to form an Accountable Provider Network (APN). Many health care policy analysts view formation of for HCPAs and APNs as a promising vehicle for potential cost savings. HCPAs allow businesses to contract directly with area health care providers and their APN, thus offering the potential to significantly reduce administrative costs.
As of July 25, 2003, two health care purchasing alliances
have begun offering health care insurance plans within
In Southwest Minnesota, the Prairie Health Purchasing
Alliance (PHPA) began offering health care insurance plans to employers in
Understanding both the interests and the needs of business owners in our region is important to determining the viability of forming a health care purchasing alliance. A survey was therefore designed to provide the steering committee of the West Central Health Care Purchasing Alliance with knowledge about area employers (Purchaser Survey). Since the formation of an APN may also be of interest to our region, a separate survey was administered to assess the interest that providers; hospitals/clinics, dentists, chiropractors and optometrists, have in working directly with businesses in Rural Minnesota (Provider Survey).
Survey Design:
The objectives of the Purchaser survey included the
assessment of conditions within the 12 county area of West Central Minnesota
that includes Big Stone, Chippewa, Douglas, Grant, Kandiyohi, Lac qui Parle,
Pope, Renville,
The Steering Committee requested information about which types of area employers are currently offering health care insurance, what type of coverage they are offering, whether or not this coverage in jeopardy, and recent trends in premiums. Additionally, the Committee wanted to determine the level of interest in this project and the types of products people would be most interested in purchasing; such as high cost/high coverage HMO type, low cost/low coverage HMO type, high/low deductible plan, etc. The complete survey is provided in Appendix A.
The Provider Survey was developed to identify how familiar area health care providers were in working with networks, whether their viability as a provider has been threatened by recent trends in reimbursements and whether or not they would support and be interested in participating in an APN. The Provider Survey can be found in Appendix B.
Survey Administration:
The administration of both surveys took place June 9-23, 2003. To increase the response rates for the surveys, a cash award incentive was used. American Solutions for Business contributed $500 for these awards. Awards of $250, $150, and $100 were given out to randomly selected respondents.
The Farm Service Agency provided a random sample of 2,000 farmers from the total population in our region of 15,369. A total of 139 farmers (7.0%) responded to the survey.
The Minnesota Workforce Center (MWC) provided a random sample of 2,000 non-farm employers in our region out of a total population of 9,356. A total of 263 non-farm employers (13.2%) responded to the survey.
Taken together, a total of 402 of the 4,000 organizations responded to the Purchaser Survey, thus producing an overall response rate of 10.1%.
The Provider Survey was sent out to all 153 hospitals, clinics, chiropractic clinics, dental offices, and optometry clinics in the 12 county region. Thirty-one offices returned the completed surveys, producing a 20.3% response rate.
The aggregate results (farm and non-farm employers combined) from the Purchaser Survey thus have a corresponding margin of error of +/- 4.9%. The farm-only results have a margin of error of +/- 8.3%; the non-farm employer results have a margin of error of +/- 6.0%. The Provider Survey, due to its very small sample size, has a margin of error of +/- 17.2%.
Results from the
Purchaser Survey:
Table 1 summarizes the types of organizations represented in the Purchaser Survey sample. Just over 46.5 percent of respondents described their organization as a For Profit Business (Farmer), 34.4 percent identified themselves as For Profit Business (Non-Farmer), Government Organizations made up 6.9 percent of the sample, 5.9 percent of respondents were from Non Profit Organizations, while the remaining 6.3 percent came from the Educational Institutions or Other categories.
Table 1:Which of the following best
describes your organization?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
For Profit Business (Farm) |
187 (46.5%) |
139 (100%) |
0 (0%) |
|
For Profit Business (Non-Farm) |
139 (34.4%) |
0 (0%) |
169 (64.3%) |
|
Government (Non-Education) |
28 (6.9%) |
0 (0%) |
34 (12.9%) |
|
Non Profit Organization |
24 (5.9%) |
0 (0%) |
29 (11.0%) |
|
Educational Institution |
11 (2.6%) |
0 (0%) |
13 (4.9%) |
|
Other |
15 (3.7%) |
0 (0%) |
18 (6.8%) |
|
Total: |
408 (100%) |
139 (100%) |
263 (100%) |
When asked approximately how many total people are employed by their organization, 74.1 percent of respondents reported that they had ten or fewer employees, 11.5 percent indicated that they had between 11 and 25 employees, and 14.4 percent of employers replied that they employed over 25 people in their organization.
Table 2: Number of Employees per
Organization
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
0-10 |
74.1% |
93.9% |
56.9% |
|
11-25 |
11.5% |
4.6% |
17.6% |
|
26+ |
14.4% |
1.5% |
25.5% |
|
Total: |
100.0% |
100% |
100.0% |
Employers were asked if they currently offered health care insurance benefits to their employees. Table 3 shows that 48.8 percent of respondents currently offer health care insurance benefits to their full time employees while 51.2 percent do not.
Table 3: Does your organization
currently offer health care insurance benefits to their full time employees?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Yes |
48.8% |
37.0% |
58.3% |
|
No |
51.2% |
63.0% |
41.7% |
|
Total: |
100.0% |
100% |
100.0% |
Table 4 shows that 13.4 percent of employers offer health care insurance benefits to their part time employees while 86.6 percent do not offer insurance to their part time employees.
Table 4:
Does your organization currently offer health care insurance benefits to their
part time employees?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Yes |
13.4% |
10.0% |
16.1% |
|
No |
86.6% |
90.0% |
83.9% |
|
Total: |
100.0% |
100% |
100.0% |
Employers were also asked if the rising costs of health care insurance threatened their ability to offer coverage to their employees. Table 5 reports the likelihood of employers dropping coverage due to rapidly rising premiums. Over 52.3 percent of respondents indicate they are either very likely or somewhat likely to drop coverage while 44.6 percent point out that they are not likely to drop coverage.
Table 5: If your organization does
currently offer health insurance to your employees, how likely is it that your
organization might drop the coverage if premiums continue to rise at their
present rate?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Very likely |
11.2% |
20.0% |
7.0% |
|
Somewhat likely |
44.1% |
48.9% |
40.6% |
|
Not likely |
44.7% |
31.1% |
52.4% |
|
Total: |
100.0% |
100.0% |
100.0% |
Additional questions were asked to determine the current rates that employers and employees in the region were paying for their health care coverage. The median cost for single person coverage under the age of 50 was $2160. The median annual premium for family coverage for an employee under the age of 50 was $5332.
Table 6: If your organization does
currently offer health insurance to your employees, what is the approximate
annual cost for …? (Note: Entries are Reported Median Annual Premiums)
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Single Coverage (Under 50) |
$2160 |
$1764 |
$2340 |
|
Single Coverage (50+) |
$3000 |
$1800 |
$3072 |
|
Family Coverage (Under 50) |
$5332 |
$3774 |
$5988 |
|
Family Coverage (50+) |
$7200 |
$3600 |
$7300 |
Employers were also asked what percentage change they had experienced in the past year in their health care insurance premiums. Table 7 shows that the median increase in health care insurance premiums was 15.0 percent.
Table 7: If your
organization does currently offer health insurance to your employees, what has
been the average percent change in premium over the last year?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Median Change in Premium |
15.0% |
15.0% |
15.0% |
Table 8 shows that 11.1 percent of employers have discontinued offering health care insurance to their employees in the last five years.
Table 8: Has your organization
discontinued offering health insurance to their employees (either full or part
time) in the past five years?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Yes |
11.1% |
11.5% |
10.8% |
|
No |
88.9% |
88.5% |
89.2% |
|
Total |
100.0% |
100.0% |
100.0% |
Furthermore, Table 9 shows widespread dissatisfaction that employers have with the range of health care insurance options available to them. Table 9 shows that 72.0 percent of respondents are either very or somewhat dissatisfied with the range of insurance options available to their organization.
Table 9: How satisfied
are you with the range of health care insurance options available to your
organization?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Very Satisfied |
4.4% |
2.2% |
6.4% |
|
Somewhat Satisfied |
23.5% |
20.1% |
25.9% |
|
Somewhat Dissatisfied |
37.5% |
36.6% |
38.6% |
|
Very Dissatisfied |
34.5% |
41.0% |
29.1% |
|
Total |
100.0% |
100.0% |
100.0% |
Table 10 shows that 87.9 percent of respondents feel very or somewhat dissatisfied with the cost of heath care insurance options available to their organization.
Table 10: How satisfied
are you with the cost of health care insurance options available to your
organization?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Very Satisfied |
2.1% |
0.0% |
4.0% |
|
Somewhat Satisfied |
10.0% |
7.4% |
12.4% |
|
Somewhat Dissatisfied |
27.5% |
27.2% |
27.1% |
|
Very Dissatisfied |
60.5% |
65.4% |
56.6% |
|
Total |
100.0% |
100.0% |
100.0% |
Despite their frustration with the limited number of health care insurance options and their cost, employers in the region believe that offering health care insurance is important in order to both retain existing employees as well as to recruit new employees. Table 11 shows that 84.4 percent of employers believe that it is either very or somewhat important to offer health care insurance in order to retain their existing employees.
Table 11: In your opinion,
how important is it to your organization to offer health care insurance in
order to retain existing employees?
|
Category |
All (Weighted)1 |
Farm Employers |
Non-Farm Employers |
|
Very Important |
59.2% |
52.3% |
65.3% |