The discontinuation of the GW Health Plan Thursday marks the beginning of a downward spiral for small healthcare plans around the country. With increased costs in prescriptions, advertising and medical costs, experts say health plan rates for larger companies will likely increase in the future.
Frank Aiosa, a partner in the benefits advising firm Chernoff, Diamond and Co., of Long Island, N.Y., which counsels employers on benefit plans, pensions, retirement and life insurance, said there has been a recent explosive increase in healthcare costs.
“Healthcare costs are up 15 to 20 percent per year for the past three years,” he said, noting the cost of the average prescription increases almost 25 percent a year. “(Insurance holders) should expect higher rates (in the future).”
Aiosa said money drug companies spend on advertising for prescription drugs coupled with more research and technology raises the prices of drugs, which adds to high healthcare costs.
According to IMS Health, a pharmaceutical research group that provides information to the healthcare industry, the pharmaceutical industry spent $1.3 billion on advertising in 2000, twice as much as it spent in 1998.
GW Hospital officials said the GW Health Plan was negatively impacted by increased costs.
“It became very hard to compete (with larger companies),” GW Medical Center spokeswoman Barbara Porter said.
Porter also said GW wanted to refocus on its core mission of education and research.
“We’re trying to get out of the clinical aspects,” Porter said. “That’s why (the Medical Center) only owns 20 percent of the GW hospital, not 100 percent.”
Chernoff, Diamond and Co. Senior Benefits Consultant Christine McCarton said the GW network does not compare to larger health plans in the area.
“GW (Health Plan) just can’t compete,” McCarton said.
Officials said although the GW Health Plan, which serves no students and mainly GW staff and community members, announced its cancellation in August, it has been going downhill for years.
Weiss Research, a Palm Beach Gardens, Fla., company that rates insurers gave the health plan a D-minus (weak) rating on a health insurance rating system in 1998, E-plus (very weak) in 1999, and D-minus again in 2000, a research representative from the firm said. Based on financial statements, the A.M. Best Company, a business and information-technology consulting firm, gave the GW Health Plan a B-minus (fair) rating in 2001, because “its financial stability was not consistently secure,” a customer service representative for the firm said.
Aiosa said insurers around the country have been struggling.
According to a press release, The Mayo Clinic at the University of Rochester in Minnesota stopped its coverage in January 2001 because of increased financial difficulties.
The GW Health Care Plan, a non-profit managed-care company, has approximately 77,000 members. About 2,600 of these members were University employees, Executive Coordinator of Human Resources Beverly Green said.
The GW Human Resources Department provided planholders information and resources about different options.
Some employees were upset because their new health coverage does not offer the same benefits.
School of Media and Public Affairs Secretary Joanne Gragasin said the GW Health Plan was free for all University employees, except for co-payments of $10 to $15 per doctor visit. She said she now she pays a $750 deductible on the CareFirst BlueCross Plan. Gragasin also said she pays for each doctor visit and gets reimbursed once she reaches the $750 mark. She said she pays no monthly rate.
City Hall Assistant Community Director Jennifer Knox said she has a different option with the CareFirst BlueCross Plan.
“Money is taken out of my checking account every two weeks,” Knox said. “So far it’s working out well, but it’s not as great as the GW Health Plan was.”
The closing of the GW Health Plan will not affect students. Dr. Isabel Goldenberg, director of Student Health Sevices, said Chickering, which provides GW students with a health care option, is renewing its contract this year.