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Lee North and his wife faced a situation in which their premiums would increase more than $200 a month.
North, 56, a retired University of Minnesota police officer, is eligible for retiree health coverage under the State of Minnesota health plan.
"The increases all the years I worked were so subtle that I didn't even notice them," said Lee, a Bloomington resident.
Because the state offers a number of options for its employees and retirees, the Norths were able to choose another plan that offered similar benefits and access to the same doctor, but without as big a premium increase. But it still will add to the Norths' health-care costs.
"It really is frustrating," said Lee. "At least I get good coverage, but I have to pay another $140."
Not only does it cost more, but the unpredictability caused by large premium increases makes it difficult for retirees like the Norths to make financial plans.
"You set aside X percent of your money for retirement, but the wild card that nobody ever mentions is health insurance," North said. "I know roughly what my pay increases are going to be based on the stock market and past history of our funds, but you don't know what the increase in your health premiums will be."
State health-plan officials instituted the large premium increases partly because of higher medical costs, generated especially by new drugs and medical technology.
Although drugs and technology are not the only reason for increased medical costs, they are receiving a lot of attention because they are rising faster than most other categories of medical expenses.
Eagan-based Blue Cross and Blue Shield of Minnesota, the state's largest health insurer, reports that the number of prescriptions increased 10 percent in 1998, while the number of X-ray and laboratory procedures increased 16 percent in 1998. It also saw the number of outpatient surgery procedures, including high-technology operations to remove gall bladders, repair knees and stabilize hearts, increase 11 percent in 1998.
Like other health plans, Blue Cross says it is trying to reduce its costs in those areas by negotiating better prices with providers, as well as working with physicians to determine appropriate and cost-effective care.
"I think there are excellent opportunities to deliver better care more systemically that have a positive impact on cost," said George Halvorson, chief executive of Bloomington-based HealthPartners.
Most HMOs have programs in place that try to reduce the cost of providing care to patients with chronic conditions, including diabetes, heart disease and asthma.
Those programs, however, are not expected to affect costs immediately because it can take years to reap rewards.
In the meantime, most health plans will likely report losses this year, as they have for the past three. To make up for those losses, the health plans will have to raise premiums again.
"We can expect several years of high premiums, because the losses that plans are taking on their commercial business [are] fairly substantial," said Scott Leitz, the state's health-care economist.