Health Costs Fall for Business Group
Humana Secured Lower Prices for Coalition of Large Employers

By Guy Boulton
Milwaukee Journal-Sentinel

Large employers in the new health plan set up for the Business Health Care Group saw their costs fall 13.7% in 2006, based on an analysis done by the business coalition.

The results - based on 15 large employers - are in line with a previous tally for the first six months of 2006 released in January.

"We made progress toward our goal," said Dianne Kiehl, executive director of the Business Health Care Group.

The group was created to help bring health care costs in the Milwaukee area in line with other metropolitan areas in the Midwest. Journal Communications Inc., the parent of the Journal Sentinel, is a member of the group.

About 89,000 people in the Milwaukee area are covered by the health plan set up for the business group. That's more than double since the start of 2005.

The companies and their employees saved an estimated $24 million through the new health plan.

Figures for other employers who don't self-insure are not available and can vary widely.

"These first-year results certainly help us take a big step forward toward that goal of getting to the Midwest average," said Larry Rambo, chief executive of operations in Wisconsin and Michigan for Humana Inc.

The savings realized last year stemmed largely from the steeper discounts negotiated by Humana when it set up a network of hospitals and doctors specifically for the Business Health Care Group.

Those contracts generally were 10% lower than the contracts Humana had negotiated for a broader network.

The Business Health Care Group and Humana do not expect employers to see lower costs this year or next. Health care costs overall are increasing about 10% a year.

The analysis released Thursday was based on 15 of the 17 large employers for which comparative information from the previous year was available.

The 15 companies self-insure, or pay most of the health care costs of their employees and family members rather than buying insurance. Those companies, which account for about 45,000 of the people in the business group's health plan, contract with Humana to administer their health benefits.

The health plan set up for the business group is priced in line with those of competitors in the so-called fully insured market, according to insurance brokers.

Jon Rauser, president of Rauser Agency Inc., an insurance broker in Milwaukee that focuses on small employers, said that the health plan for the business group doesn't promise the lowest price in the market.

"It's not wildly successful, but it's working out well," Rauser said. "and there's promise that it will get better."

But Rambo said that competitors lowered their prices last year in response to the business group's new plan.

Susan Rabe, a consultant with HNI Risk Services in New Berlin, agreed that the new plan has influenced the market.

"They are not setting the course, but they definitely are nudging it in a different direction," Rabe said.

The next step for the business group will be changing consumer behavior, including finding ways to encourage people to use doctors and hospitals that offer the lowest prices.

Last year, Humana introduced a new feature that gives estimated prices for procedures and tests.

"While we are pleased with these first-year results," Rambo said, "there still much more work to be done."