Costs shift to workers as health insurance expenses rise
The cost of employer-sponsored health insurance has grown more than four times faster than inflation since 2001, and the costs borne by workers have risen at an even faster pace as companies increasingly shift health care expenses to their employees.
Instead of simply increasing premiums, many employers now require their workers to pay more when they get medical care. This year, nearly one in three workers covered by their employers had a deductible of at least $1,000, up from one in 10 five years ago.
The figures were released Tuesday in the Kaiser Family Foundation/Health Research & Educational Trust 2011 Employer Health Benefits Survey. It found that premiums rose by 8 percent for individual coverage and 9 percent for family coverage in 2011, outpacing wages, which grew at 2.1 percent, and general inflation, which rose by 3.2 percent. The average employer-sponsored family insurance plan now costs $15,073–more than some cars, noted Drew Altman, president and CEO of the Kaiser Family Foundation.
The jump follows four years of premium growth that was below 5 percent, and occurred at a time when workers’ wages did not keep pace with inflation, Altman said.
While costs have consistently increased, the way they’re paid has been changing. Altman cited a trend toward offering insurance plans with high deductibles that carry lower premiums but require members to pay large sums of money before coverage kicks in, which can lead people to use fewer health services. It’s one of the few ways employers have to control health care costs, he said.
“To me, this is the quiet revolution going on in health insurance that’s kind of under the radar screen,” he said Tuesday during a conference call with reporters. “The nature of what we call health insurance is changing without a great deal of analysis or debate.”
Proponents of high deductible plans say they make people more mindful of their health care spending and less likely to use services they don’t need, while critics say they can make people unable to afford care they need.
The survey found that high deductibles were particularly common among workers covered by companies with fewer than 200 employees. Half had deductibles of more than $1,000, up from 16 percent in 2006, and 28 percent had deductibles of $2,000 or more, up from 6 percent five years ago.
Though four-figure deductibles were not as prevalent among larger employers, they’re becoming more common. Deductible levels were at least $1,000 for 22 percent of workers covered by large employer plans this year, up from 6 percent five years ago, and 5 percent had deductibles of $2,000, up from 1 percent in 2006.
Gary Hartnett, a principal in the Hartford office of the consulting firm Mercer, said that many employers are waiting to see how health reform changes things when it rolls out in 2014. Until then, he predicted they will continue to shift costs to employees and tinker with plans rather than make major changes.
“There’s really not much else they can do,” he said. “They’ve already cut costs as much as they can in other places and they’re not in a position to just not offer benefits.”
Workers, meanwhile, are more amenable to changes in health plans, expecting changes even if they don’t like them, he said.
Ken Comeau, vice president of the Connecticut Business and Industry Association, which offers health plans to about 6,000 employers, said the move toward requiring employees to pay more when getting medical services has accelerated in the past three to four years. Some plans with higher deductibles allow workers to use tax-preferred health savings accounts or health reimbursement arrangements to save money for out-of-pocket costs.
The plan changes have helped moderate double-digit premium increases that Comeau said do not appear to be slowing, but he said rising premiums are not the only reason for the changes.
“In the end, it isn’t always just a complete cost shift to the employee,” he said. “It more is using some of these tools to cause people to change behaviors that make more sense in utilizing health care.”
State Healthcare Advocate Victoria Veltri said she’s seen an increase in costs shifting to employees as their companies try to control costs.
Many high-deductible policies cover preventive services without applying the deductible, but Veltri said her office gets calls from people who did not realize they wouldn’t have coverage for certain things until they spent up to the deductible, or who still had to contribute to the costs after meeting it. In addition, she said, some people believe a deductible is for the entire family when each person covered has to meet the deductible separately before the insurer will pay for care.
“It’s just really rough when you listen to some of the people call in and the problems they’re facing because they just don’t have the coverage,” she said. “They haven’t met the deductible, so there’s nothing we can do to help them.”
Veltri said she advises people considering plans with high deductibles to assume they will need medical care and set aside money every month to make sure they can pay out-of-pocket costs if they come up.
“Most people who are taking these policies that contact our office for help, they just have no other choice,” she said. “It’s either that plan or no insurance.”
Kevin Galvin, president of Connecticut Community Maintenance in West Hartford and chairman of Small Business for a Healthy Connecticut, which has advocated for health reform, said the small businesses he hears from are seeing continued increases in health care premiums or being offered new insurance products that provide less coverage.
Others said there are indications that the growth of health care costs is slowing.
A recent Mercer survey of employers found that the rate of growth in health plan costs had slowed somewhat, from 6.5 percent a year to 5.5 percent, although Hartnett noted that it’s still above the rate of inflation. One reason for the slow-down, he said, is a decrease in the use of medical services, but he said much of that can be traced to the struggling economy and might not be a long-term trend.
“The general sense that we see is that employees, because they’ve been asked to shoulder more of the cost of care, have been foregoing certain services, either putting them off or just foregoing them entirely,” Harnett said.
Hartnett said the rate of cost increases in Connecticut has been consistent with the national trends, but the per capita costs in the state tend to be $500 to $1,000 higher. The reason? The state’s workforce is older, the price of medical services is higher, and the state still has more plans that provide richer benefits, he said.
Brian Driscoll, chief operating officer at Ovation Benefits in Farmington, said that Connecticut companies with 50 or more employees have been seeing their rate increases slow down, from increases in the low to mid-teens in the past couple years to increases in the high single-digits.
“That’s actually something that we anticipate will probably carry forward in 2012,” he said.
Driscoll said one factor behind the smaller increases could be the requirement in federal health reform that insurance plans spend a certain percentage of premium dollars–80 or 85 percent, depending on the plan size–on health care costs and quality improvement efforts.
Some employers are also seeing results from wellness programs aimed at improving the health of their workers, Driscoll said. He said many companies that are embracing the idea have already tried more traditional options to contain costs, like changing plan designs, changing insurance carriers or increasing employee contributions, and are looking for other solutions.
Over the past decade, health care costs have outpaced wages and inflation, the Kaiser survey found.
Between 2001 and 2011, overall premiums for family coverage rose by 113 percent, from $7,061 to $15,073, while the share of the premium cost paid by the employees rose by 131 percent, from $1,787 to $4,129.
During the same time period, wages rose by 34 percent and inflation was 27 percent.
America’s Health Insurance Plans, a trade group, released a statement attributing the increasing health insurance premiums to rising prices for medical services, a decrease in younger and healthier people taking insurance and new federal and state mandates.
“This report is just the latest warning that far more needs to be done to address the rising cost of health care,” president and CEO Karen Ignagni said. “Policymakers in Washington and the states need to focus on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance. Reducing health care cost growth will make it easier for consumers and employers to afford coverage, ease the burden on federal and state budgets, and put our vital safety net programs on sustainable and fiscally responsible paths.”
The Kaiser survey also asked about changes related to the federal health reform law. Some of the earliest parts of the law to go into effect required insurance plans to cover preventive services with no out-of-pocket cost to the member and to let customers select their own doctors from within the insurers’ networks. But health plans can avoid meeting those requirements if they do not change substantially when they are renewed, a status known as “grandfathered.”
According to the survey, 72 percent of firms had at least one grandfathered plan, and 56 percent of covered workers were in one.
Nearly a quarter of workers–23 percent–were in plans for which the employer reported changing cost-sharing requirements because of the health reform law, and 31 percent were covered by plans for which the employers reported making changes to services considered preventive because of the health reform law.
Sixty percent of employers offered insurance to their workers, although not all employees were eligible for coverage. Among the firms that offered coverage, 79 percent of workers were eligible, and 81 percent of those took the coverage. Overall, 65 percent of workers at firms offering coverage received it.
The survey was conducted between January and May and included 3,184 firms with three or more employees.
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