BY TUX TURKEL

Maine Sunday Telegram

It's a point of pride for John Lambert, co-owner of the Lambert, Coffin, Haenn law firm in Portland and Bangor, that his company pays the full health insurance premium for 37 covered employees. Even in a recession, many business owners say, good benefits help keep good workers.

So Lambert was upset this month when he got a coverage quote for next year from Anthem Blue Cross and Blue Shield. The premium on his HMO plan is set to rise more than 25 percent in 2010.

That would boost the company's annual cost from $237,499 to $297,354. So if Lambert does nothing, the cost of insuring his workers will rise roughly $60,000 next year. In addition, co-payments for doctor visits would go up.

Now Lambert is wrestling with some options: Switch carriers, offer a high-deductible plan to his workers, or ask them to chip in on the premium.

"We really don't want to get to that," he said of the cost sharing. "We're not sure what we're going to do."

Across Maine this month, employers are reviewing quotes for health insurance that, in many cases, contain substantial rate hikes. That's especially true in the small-group market, which includes companies with fewer than 50 employees.

The average small-group premium is due to go up 20 percent, according to rates filed at the Maine Bureau of Insurance. That's on top of a 15 percent average rise in 2009.

Figures for large-group plans aren't available yet, although Anthem is projecting increases in the lower teens.

That's in line with responses from 29 large Maine employers surveyed by the Mercer Health & Benefits consulting firm. They said their 2010 costs would rise by nearly 13 percent, if they don't make changes to their current plans.

And that's what four out of 10 companies told Mercer they will do, by raising deductibles and co-pays. Another 40 percent will increase their workers' share of premium contributions.

These and other measures could cut the actual premium cost increase to around 9 percent for employers in the Mercer survey. Last year, the adjusted cost rose 5.3 percent.

The percentage jumps add up to real money. Lambert calculated that it will cost him $16,000 next year to keep the Anthem plan for his five-member family.

What's driving these outsized premium hikes, on the heels of a recession?

People are using a lot of medical care, benefit managers say.

Medical use spikes during an economic downturn, according to Roland Guerette, a principal at Mercer. It can be hard to quantify, Guerette said, but people who have insurance and are worried about losing their jobs may rush to have elective procedures. Stress also may play a role, with financial pressure at home and heavy workloads on the job.

"People may be power-using the system," said Carrie Baker of C. Baker & Associates, a Yarmouth benefits broker.

Baker said she's seeing a similar uptick in dental claims.

Another factor: People laid off in the recession may have kept their work coverage, after the federal government announced last spring it would pay 65 percent of COBRA costs as part of the economic stimulus act.

"The claims are still going to the companies, even though the people are unemployed," Baker said.

At Anthem, the state's dominant insurer, actuaries are watching another driver - the H1N1 virus. The flu is bumping up visits to doctors and hospitals, as well as pharmacy costs.

These observations are in line with what Lambert has come to understand, and it has left him frustrated.

"There is unbridled demand," he said. "Until we change how everyone buys health care services, nothing will get fixed."

The rate hikes are pending just as national health care reform is hotly debated in Washington, D.C. But business leaders here say there's a disconnect between the cost crunch companies and their workers face today and the broader goals of extending coverage, years from now.

In a recent survey, Maine State Chamber of Commerce members ranked health insurance costs as their top concern, trailed by income taxes and energy prices.

"What's being discussed in Washington will help very little," said Peter Gore, vice president for advocacy and government relations at the chamber. "People are looking for relief now, and they don't see it forthcoming."

Roughly half of all Mainers -- 660,000 or so -- receive health insurance through work. Most are covered by four major insurers -- Anthem, Aetna Inc., Cigna HealthCare of Maine Inc. and Harvard Pilgrim HealthCare.

Federal programs, namely Medicaid and Medicare, cover more than a third. The rest get insurance through individual plans or state-sponsored DirigoChoice.

Six out of 10 companies are self-insured, according to Katherine Pelletreau, executive director of the Maine Association of Health Plans. The practice of setting aside money to cover losses used to be only for big companies with the resources to manage insurance plans. But mid-size firms are moving in that direction, Pelletreau said, to skirt some state rules and save money with more flexible plan designs.

Roughly 12 percent of Mainers are uninsured, a share that has been growing. A key to the Democratic health plan advancing in Congress is to cover uninsured Americans, who are less likely to have access to preventive care and who rely more on expensive emergency rooms for routine medicine. Over time, advocates say, covering the uninsured will help rein in costs and reduce the uncompensated expenses hospitals now shift onto private insurance.

But these long-term goals aren't doing anything now to check rising costs for employers, the providers of most health insurance. Gore, the state chamber executive, has visited 30 businesses around the state on a recent fact-finding tour. Health insurance inevitably comes up. Gore hears a consistent message: Companies that offer insurance think it's important to maintain it.

"Even with a high unemployment rate, companies want to keep and hire the best workers," Gore said. "Benefits play a role in that."

As the January renewal date approaches for many companies, it's not clear why the small-group market, which covers more than 100,000 Mainers, has such high price trends. One thought, Guerette said, is that wellness programs created at larger companies in recent years are seeing results. Smaller firms tend to lack the resources to run efforts to stop smoking and encourage exercise.

So for now, the medical trends and the reform measures being considered in Congress aren't encouraging for small business, according to Christopher Dugan, an Anthem spokesman.

"There isn't enough focus on how we reduce health care costs," Dugan said. "Without that, we're going to see premium increases, year over year."

That prospect leaves business people such as John Lambert facing hard decisions. In his case, it's how to make up $60,000 in new expenses. Unless he modifies his health plan or asks workers to contribute, the firm will have to work harder and longer next year, just to stay even.

"Twenty-five percent increases are just unsustainable," Lambert said.