What began as a slight uptick in health-care premiums three years ago has become a trend that has no real end in sight.
Employers, who pay for much of the health-care insurance in this country, are seeing health-care costs go up anywhere between 10 and 20 percent, and some small employers are getting premium increases that are even higher.
Most Minnesota companies, however, are keeping health insurance as part of their benefits packages. In a tight labor market, they can't afford to drop coverage because health insurance is an option that most workers insist on as a condition of employment.
A survey of Minnesotans conducted earlier this year by the University of Minnesota found that 70 percent get health insurance through their job, up from 65 percent in 1990.
But employees are feeling the effects of the cost increases. Most are paying higher premiums or are being asked to make higher copayments at the doctor's office or pharmacy counter.
High health-care costs also affect employees indirectly through lower wage increases, or lost job and career opportunities caused by a lack of capital.
"In order to pay for health care, [companies] are adjusting their starting wages, delaying expansion plans and adjusting employment levels," said Bill Blazar, senior vice president at the Minnesota Chamber of Commerce.
Of the companies the chamber surveyed this year, 63 percent said they have reduced other expenses to compensate for health-care costs, with 40 percent saying they've given smaller salary increases. And 36 percent said they've raised prices to cover health-care expenses.
Dennis Jindra, owner of Kirscher Transport in Virginia, Minn., knows that his 24 percent increase in health-insurance premiums will mean that there's less money available to run his business.
"This is certainly not going to help me buy any new equipment," said Jindra, whose company provides specialized heavy-trucking services to the mining industry. He estimates that the added health-care expenses will cost $3,000 a month.
"I know that is small potatoes to a 3M or IBM, but to me that is two more tractors a month I could have," he said. "It is a significant amount of money for a small company."
He can't pass all of the costs on to his 32 workers because most are covered by a union contract that limits employee cost-sharing to 4 percent of the total premium. He said that even without that limitation, he'd be conservative in changing the benefit.
"You shouldn't have to take less coverage just to keep your employees insured," he said. "I believe in comprehensive coverage for my employees."
He wonders if this year's 24 percent increase will be repeated, or if it is a one-time event.
"In 13 years this is the highest increase I've ever seen," he said.
He's not the only one saying that.
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.