Commercial health plans are products offered by employers to their employees through company benefit programs.
As is always the case when it comes to health care, the reasons for the difference in premium growth rates are complicated and subtle, and not necessarily as disturbing as one might think. The major reason for the difference is that New Mexicans in general have different coverage from what other Americans generally have.
The reason premiums went up at all for New Mexicans covered by employer-purchased insurance, however, is a little more straightforward. It begins with a drug called Sovaldi.
Gilead Sciences began selling Sovaldi early this year as a treatment for hepatitis C, a virus that can cause serious liver disease, including cancer and cirrhosis. The Centers for Disease Control and Prevention says that the disease is spread primarily through contact with the blood of an infected person and that 3.2 million people in the United States have chronic hepatitis C. The state Health Department had identified about 9,500 hepatitis C cases in New Mexico as of 2012, the most recent year for which data are available.
Before Sovaldi, treatment included shots of interferon plus one or two other drugs. The side effects were fairly miserable, and many patients could not safely take the drugs. Treatment could last as long as 48 weeks. Many patients abandon treatment before the virus is wiped out.
A combination of drugs that includes Sovaldi, on the other hand, is easier to tolerate, has a 90 percent cure rate and is completed in as few as 12 weeks.
Sovaldi also costs $84,000 for a 12-week course of treatment, or $1,000 a day. Conventional treatment costs from $15,000 to $20,000 over a 48-week period.
Presbyterian Health Plan said it expects 52 people covered by commercial plans to take Sovaldi this year, more next year. The plan says its medical costs are up 6 percent (hence the premium increase of the same amount).
Almost half of that increase is associated with Sovaldi. The rest is associated with cost increases due to other pharmaceuticals and to new technologies.
Presbyterian said its average family rate for commercial plans is $14,600. The Kaiser Family Foundation reported last week that a survey of businesses found that the national average annual premium for family coverage this year is $16,800, up 69 percent from premiums charged in 2004.
Employers paid $12,000 of the premium, according to Kaiser. There are no similar data available for New Mexico plans.
Kaiser's survey found that employer plan premiums rose 26 percent in the past five years, but the average deductible paid by the employee has risen 47 percent. No similar data are available for New Mexico.
By state law, New Mexico health plans have to spend 85 percent of the premiums they collect on medical bills. Federal law requires plans to spend 80 percent.
State Insurance Superintendent John Franchini said New Mexico insurance plans have offered better coverage than the national average, at least before provisions of the Affordable Care Act that took effect this year forced some insurers to improve coverage. New Mexico's Legislature has for several years mandated increased coverage in plans sold in the state.
And, Franchini said, compared with the not-so-distant past when premiums regularly increased by 10 percent at a minimum, recent premium trends have been fairly stable.
Two factors account for New Mexico's higher rate of commercial premium increases compared with the national average.
First is the significantly lower number of commercially insured who live in New Mexico. According to data collected by the University of Minnesota School of Public Health, only 48 percent of New Mexicans have employer-sponsored coverage, the lowest rate in the nation.
About 55 percent of all Americans have employer-sponsored coverage. New Hampshire has the most, at 73.8 percent of the population.
Health care providers report that commercial plans generally pay them the best. To be able to afford the cost of caring for the many New Mexicans without commercial coverage, they try to negotiate even better rates for seeing commercially insured patients - if they have market power, that is, and not all providers do.
To the extent that such cost shifting can occur, that pressure pushes commercial rates up faster.
The bigger reason, Franchini said, is that New Mexico's employers offer more expensive coverage than employers elsewhere.
According to the superintendent's office, HMOs account for 70 percent of the commercial coverage written in New Mexico. Nationally, only 13 percent of employers purchase HMO coverage for their employees.
Premiums for HMOs are higher than other coverages because they pay for more, Franchini said. Plans like PPOs usually require far more out-of-pocket spending by the patient in the form of deductibles and copayments. The insurer is paying for less, so it charges a lower premium.
UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to http://ift.tt/1qG5UTv to submit a letter to the editor.
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