Health Plans Shifting Health Costs to Employees
11/26/2002
Thompson Financial
By Jill Elswick Most plans seen shifting health costs If your company is increasing the employee share of health care costs next year, now you can at least show workers the change is widespread. The latest proof comes from a national survey of 2,014 randomly selected public and private firms with three or more workers. Health insurance premiums surged by 12.7% in 2002, producing the sharpest increase since 1990, according to the Henry J. Kaiser Family Foundation/Health Research and Educational Trust (HRET) 2002 Annual Employer Benefits Survey. It was the sixth consecutive year of accelerating inflation in the cost of employer-sponsored health insurance and the second year of double-digit inflation. Group benefit plan premiums now average $3,060 for single and $7,954 for family coverage. Employees pay an average of $454 per year for single coverage, a 27% increase - or additional $95 - from last year. Family coverage, meanwhile, costs an average of $2,084 per year, a 16% increase equaling $283. Analysts expect the costshifting to continue. "Health care costs are rising sharply again. Workers are starting to pay the price. And employers tell us we should expect more of the same next year," said Drew Altman, president of the Kaiser Family Foundation, upon the survey's release in September. "Faced with rising premiums, employers are now asking their employees to pay more for their health care. They are now starting to cut back on health benefits." Survey highlights Indeed, 78% of survey respondents said it was very or somewhat likely they would increase employee premiums for health benefits in 2003. Fifty-one percent said it was very or somewhat likely they would increase prescription drug copayments, and 42% said the same for increasing employee deductibles. Findings revealed increased cost-sharing across the board, affecting premiums, copayments, and deductibles. "It was the breadth of the impact across many indicators that, to me, was the most powerful and surprising finding in this study," said Altman. Examples are many: Deductibles for PPO in-network providers jumped 37% to $276 in 2002, up from $201 last year. Fifty-seven percent of covered workers now have a three-tiered prescription drug benefit, up from 36% in 2001 and 29% in 2000. An additional 28% of workers have a two-tiered plan. Copayments are rising, particularly for drugs on higher tiers; brand name drugs with generic substitutes now average $26 per prescription, up from $20 in 2001. And for the first time in four years, the survey found, more workers experienced reduced benefits than increased benefits. Seventeen percent of covered workers' firms report they offered employees a lower level of health benefits than last year, while 10% said they offered more generous benefits. Retiree health benefits continue to erode, with 9% of large firms (200 or more workers) reporting that they eliminated retiree health benefits for new hires or existing employees in the last two years. Moreover, 40% of large firms increased retiree share of premium, 30% introduced three-tiered cost-sharing for prescriptions drugs, and 26% increased the amount retirees must pay for drugs. Thirty-four percent of large companies offer retiree health benefits, compared to 66% in 1988. Sixty-two percent of firms surveyed offer health benefits to employees. Predictably, large firms were more likely than small firms to do so. While 99% of large firms provide health benefits, 61% of small firms (3 to 199 workers) choose likewise. In a finding authors say portends things to come, the percentage of small firms offering health benefits has declined from 67% in 2000. Troubling trend "It's particularly troubling to begin to see again a downward trend when we had seen some boost in coverage in the small firm market during the boom economy," said Diane Rowland, executive vice president of the Kaiser Family Foundation. "Because of the downturn in the economy, the workforce is no longer so competitive that employers are willing to absorb the cost of health insurance to attract and retain workers. They're beginning to say, We can get the workers we need. It's time to pass on the cost of health insurance to more of our workers.'" "If the record of inflation is the same for the next three years as it was for the last three years, the cost of family coverage in 2005 will be $11,000," noted Jon Gabel, vice president of health system studies for HRET. "If you think that the average worker in the United States earns about $26,000 to $27,000 a year, this will give you an idea of the financial burden of higher health care costs." Premium increases are being driven by rising medical claims experiences and not by the traditional underwriting cycle, according to Gabel's analysis. The inflation rate for self-insured plans (12.3%) is significantly close to that for fully insured plans (13.2%), meaning that both types of plans expect similar increases in claims expenses. "Since underlying claims expenses dictates the future path of inflation in this nation, this means we are headed for a number of years of more double-digit inflation, I believe," said Gabel. "This is bad news, I think, for the American public." Employers hardly need to be reminded. Fifty-three percent of firms surveyed named health insurance as the "greatest cost concern for the company." "All the firms we talked to reported substantial concern about the cost of health insurance, and that concern outweighs their concerns over salaries, workers' compensation, pension, sick leave, and disability," said Rowland.
-J.E.
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