HMO chief: Vegas costs rising slower than national rate

Grace Leong

Tuesday, Sept. 10, 2002 | 11:16 a.m.

Nevada companies face higher health insurance premiums for their employees next year, but costs are rising slower locally than nationwide.

That's according to Anthony Marlon, chairman and chief executive of Nevada's largest insurer -- Sierra Health Services Inc., which insures 287,000 people through its subsidiaries Health Plan of Nevada and Sierra Health & Life Insurance Co.

Addressing more than 100 health care industry participants at Health Plan of Nevada's 20th anniversary celebration Monday, Marlon said he sees health care costs for Nevada employers rising by 10 percent for 2003 compared with an expected 13 percent to 14 percent increase nationwide.

"The average annual premium in 2002 for single coverage nationwide was about $3,000 and $7,983 for family coverage," he said, citing a Thursday report from the Henry J. Kaiser Family Foundation, a Washington-based nonprofit organization that researches health issues.

"The average premium in 2002 for single coverage in Nevada is $1,800 a year and $5,000 a year for family coverage, some 40 percent below national numbers," Marlon said. "There's nothing we can do to reduce health care costs. We can only contain the increase in health care costs."

"Unless there's relief in medical malpractice rates, physicians will continue to demand increases in compensation -- a component that makes up 25 percent of total premiums paid by employers," Marlon said.

"As Congress and the state Legislature begin to seriously address health care costs, they will help the private sector to inject some stability into the health care financing system," he said. "Medical malpractice reform will take several years to wind its way through the court systems. Sierra's job is to keep the increase in health care costs to the lowest possible number."

Peter O'Neill, a Sierra vice president, said Health Plan's sizeable membership gives the Las Vegas-based company leverage in negotiating prices with hospitals, physician groups and pharmaceutical companies.

Sierra is able to negotiate contracts at rates of about 20 percent below that of some of its competitors in Nevada, said Health Plan President Jon Bunker.

"Sierra also has the added advantage of not only financing its members' health care but also delivering their health care through its subsidiary, Southwest Medical Associates. This saves on administrative costs," O'Neill said. "Southwest employs 150 physicians -- the largest physician group practice in Southern Nevada -- and delivers medical services at 11 of its clinics."

"Sixty percent to 70 percent of HPN-insured members use physicians at Southwest Medical for their primary care. A lot of other health insurers don't own their own delivery system," he said.

Kara Kelley, chief executive officer of the Las Vegas Chamber of Commerce -- HPN's largest account -- described Sierra's Las Vegas Chamber of Commerce Health Plan, which insures 15,000 members including small businesses in Nevada, as "important for businesses struggling to control costs."

Separately, while U.S. health insurers that participate in the Medicare program say they will drop about 200,000 elderly and disabled clients in 2003 because government payments haven't kept up with medical costs, Sierra said it has no plans to drop some 57,000 seniors in Nevada enrolled in its Senior Dimensions Medicare program.

"Medicare is different for us than other insurers. We are known as a social Medicare HMO program, which means, in exchange for providing value-added social services including transportation for the seniors to and from the hospitals and in-home domestic care, we get 4 percent more in reimbursements from the federal government," O'Neill said.

Bunker also described a deal announced Monday that allows Sierra's 287,000 members to be treated at three Universal Health System Inc. hospitals in Las Vegas -- Valley, Summerlin and Desert Springs -- effective Oct. 1, as favorable for both parties.

Sierra said the deal would allow its insurance subsidiaries to have contracts with every major hospital in the Las Vegas area.

Sierra and Universal have resolved a dispute in which they sued each other. The dispute began in 1998 when Valley sued Sierra for withholding $1.5 million in payments. Sierra withheld the money to recover funds it said were owed by a Universal hospital in Northern Nevada. That dispute had ended Sierra's relationship with the Valley hospitals.

"Valley has since expressed an interest in re-stablishing a relationship with Sierra because of changes in Nevada's health care climate ... including our population growth and an acute shortage of hospital beds," Bunker said. "HPN needs more beds and Valley wants access to our members that they've not had for three years since they parted ways with us after the lawsuits were settled."