Health insurers face exam

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NEW YORK (CNNMoney.com) -- As health insurers prepare to kick off their annual meeting, analysts expect answers on how to reduce health care costs and give customers more access.

The American Health Insurance Plans' (AHIP) three-day conference, starting Wednesday in San Diego, is expected to include more than 2,000 attendees from commercial insurers, employers, state and federal government, medical groups and hospitals.

"There's been quite a lot of turmoil in the health care world. Everyone's walking on eggshells," said Richard Kipp, principal with health care consulting firm Milliman. "Consumers are wondering how all this will affect their health coverage."

As the Obama administration's push to overhaul the health care system gains momentum, Kipp said the industry needs to be responsive.

He and others outlined five top industry issues that directly affect consumers.

Costs: Even though most Americans -- about 177 million -- are covered by employer-provided health insurance, they face a "double whammy" increase in their share of health care costs.

"If consumers were paying 10% of their insurance premiums, they are now paying 15% because employers are trying to bring down their own business expenses," said Kipp."So that's a 50% increase in the out-of-pocket costs.

At the same time, the cost of health plans is also rising, and more employers are passing those increases to their workers as well.

Access: Any health care system revamp must include a solution for providing insurance for 47 million "uninsured" Americans.

"The basic issue for insurers is how do they bring the costs down low enough to make it readily available to the uninsured," said Kipp.

"The uninsured is a tricky bucket. It includes people who can afford but don't buy insurance it, or younger people who are taking the risk of not buying insurance," he said.

It also includes people who have medical problems but can't afford coverage, get rejected by insurers, or get priced out after insurers learn about a precondition.

"In other words, people who really need insurance the most can't afford it," Kipp said.

Still others believe any fundamental reform to health care has to be driven by insurers changing their business model.

Len Nichols, health economist with public policy institute New American Foundation, wants insurers to "guarantee issue of coverage," which means everyone can buy health insurance for a standard price, regardless of cost or health condition.

Price transparency: Kipp said insurers have to better educate consumers about their health insurance options and prices. "Price transparency is one of the difficult challenges for insurers," he said.

Health care prices -- both physician fees and medical procedure prices -- have been cloaked in mystery for decades .

Consumers are partly at fault. "When you are sick and in front of a doctor, the last thing you think about is asking how much the treatment is going to cost you," he said.

But pricing transparency will help consumers better manage their health care expenses, Kipp said. Large insurers such as Aetna (AET, Fortune 500) and United Healthcare (UNH, Fortune 500) are already experimenting with providing their customers pricing information for doctors' fees and cost of some treatments.

On Monday, AHIP hinted at providing greater price transparency. The trade group said it is advocating that each state provide a list of all insurance plans available to individuals.

"There would be comparative information in a common format on benefits, price and quality features to enable individuals to comparatively shop for coverage and determine whether they are eligible for subsidies," AHIP said in a statement.

Individual responsibility: More employers are providing wellness incentives such as subsidized gym membership and discounts on premiums if workers try to stay healthy.

"We've heard that two-thirds of employers have wellness programs offered through insurers," said Sandy Lutz, director of the Health Research Institute of PricewaterhouseCoopers.

"But we're also hearing that the government needs to do more around wellness," she said. "This is becoming a big issues especially since (President) Obama has talked so much about it."

Senate leaders are debating a tax on carbonated soft drinks as a way to pay for health care reform with the added benefit of discouraging unhealthy eating habits.

Role of technology: Use of health care technology will give broader access to consumers without raising costs, said Lutz. "The industry needs to embrace technology and also figure out how to pay for it."

Also, President Obama has set a five-year deadline for all Americans to have electronic medical records, saying digital records will save billions by cutting waste and eliminating repeated tests and errors.

Public plans: Perhaps the most controversial proposal tied to health care reform, Obama backs public insurance plans as an alternative to commercial plans, intended to offer coverage to those who currently can't afford insurance.

Commercial insurers worry that they won't be able to compete against subsidized rates offered by public plans.

Nichols said one way to even the playing field is to have public plan premiums based on market prices rather than government-subsidized prices similar to Medicare.

For his part, Kipp said he's not comfortable with the idea of the government directly weighing into the health insurance market.

"I am hoping that it will get tested in a few markets first rather than being implemented as a salvation plan that disrupts the entire market," he said.