For millions of Americans who get their health insurance through their job, autumn brings not only falling leaves and cooler breezes, but also difficult choices. That’s because it’s the time when many employers present workers with their insurance options for the coming year.
The selection is likely to be even less appealing this year than last. According to experts and industry insiders, recent trends suggest rates will continue to rise and employers will continue to shift more of the cost of health insurance onto workers – asking them to shoulder a larger share of premiums, for instance, or increasing out-of-pocket costs such as deductibles and co-pays.
This past year, overall premiums for employer-sponsored coverage – meaning the amounts paid by employer and employee combined – rose a relatively modest average of 3 percent for family coverage, according to a study by the Kaiser Family Foundation and the Health Research & Educational Trust. But the share of such premiums covered by the worker increased from 27 percent to 30 percent, with the result that the amount paid by workers rose an average of 13.7 percent.
The most comprehensive statistics on plan offerings for 2011 won’t be available for months. But a September survey of employers by Mercer, a leading benefits consulting company, suggests last year’s patterns will continue.
Overall, the employers said that they expected their health-care costs to increase between 9 and 12 percent – but that they planned to use cost-saving measures to effectively bring that increase down to 6 percent. Some 57 percent said one way they would do this would be to have their employees pay a greater share of the cost of coverage.
Many employers also said they would try to lower their costs by prompting employees to improve their health: Forty-four percent said they will add health management or wellness programs. An additional 38 percent said they will add incentives for employees to participate in existing programs.
Tracy Watts, a partner at Mercer, said this often involves lowering employee premiums or giving them gift cards for participating in health assessment surveys. These reviews alert workers to steps they could take to improve their health.
“There may even be incentives to achieve your ideal biometrics – blood pressure and body mass index, for instance,” she said. “That’s very encouraging, because it suggests that employers believe that focusing on members’ health is a good thing to do.”
Impact of the new law
Because this is the first major open-enrollment period since key provisions of the new health-care law started taking effect, many workers will wonder how much of the plan changes they see is due to the legislation. Not much, say analysts.
The law’s most market-altering changes – including provisions that may or may not control premiums – don’t kick in until 2014.
“We’re three years away from that,” said economist Paul Fronstin of the nonprofit Employee Benefits Research Institute. “For the most part, the plans don’t know what they’re going to be doing [in response]. It’s just too soon.”
There is a notable exception: On their next annual renewal date, all plans will be required to comply with certain mandates such as eliminating lifetime dollar limits on benefits and allowing parents to put adult children up to age 26 on their plan. Insurers that make certain changes to existing plans or employers that switch insurance carriers will have to offer additional benefits such as free preventive services.
It’s possible that bare-bones employer-sponsored plans – particularly small-group plans bought by businesses with only a few employees – may need to substantially increase premiums to cover the extra cost. And a number of insurers have already blamed the law for coming large rate hikes. But estimates by researchers suggest that on average premium increases for employer-based plans due to the new requirements will be less than 2 percent.
“And we’re talking less than 1 percent in many cases,” said Sara Collins, head of the insurance program at the Commonwealth Fund, a health-care research group.
Watts was less sanguine, noting that the small businesses surveyed by Mercer expected the new law’s requirements to add 3 percent to their costs. “As someone who works with employers, I can say it’s hard to get even a 1 percent increase out of your plan costs” through cost-saving measures, she said.
But she and other analysts agree that the most significant cause of increased cost to workers this year will likely be the same as those in the recent past: rising health-care expenses and the sluggish economy.
For large employers that self-insure, the main issue may be spikes in the prices charged by health-care providers.
At other companies, particularly mid-size and smaller ones, the workers’ health status may be the determining factor. “For instance, if someone got sick in your group, especially with a disease that [your insurer] thinks is going to continue, they will take that into account when they set your premiums, and you are going to take a whack for it,” said Gary Claxton, who directs the Kaiser Family Foundation’s Marketplace Policy Project.
Large companies can be affected by shifts in the makeup of their work force. “A company will look at, for instance, are they going to be hiring or downsizing?” said Claxton. “Do they have a bunch of early retirees who are going to move from one plan to another?”
Similarly, if the economic downturn has cut into a company’s profits, it may feel a need to shift more health-care costs onto workers even if overall premiums haven’t gone up.
That’s the position that Liz Parker and her husband found themselves in this year. Owners of the Tulsa Rib Co., a restaurant and catering business in Orange, Calif., they have been insuring their regular workers since they opened nearly 30 years ago.
“My husband has been working in restaurants since he was 13, and he would see a lot of owners just buy fancier cars when they started making money and not think of their workers,” she said. “So from the start we made a choice that once we became profitable, we would make sure to take care of the employees first.”
But Parker’s commitment has been tested in the face of annual premium increases that have ranged from 15 to 45 percent even as the benefits have gotten less generous. This past year Parker, who paid 100 percent of her 14 regular workers’ premiums and 90 percent of their dependents’ premiums, spent nearly $100,000 on an HMO plan that charges her workers a $45 co-pay for each doctor’s visit, $500 for emergency room visits and has a deductible of $2,500. “It’s horrible. Some of our dishwashers make $18,000 a year. So they’re really going to hesitate before, say, bringing in their baby for an earache,” she said.
When her insurer told her she could expect her rates to rise anywhere from 18 to 38 percent in 2011, Parker spent hours searching for a better alternative. The new HMO she found offers slightly more generous benefits and actually costs less. And through the new law, Parker estimates she will also get several thousand dollars from a federal subsidy for small businesses offering insurance.
Yet she still felt the need to increase the share of premiums her workers pay for their dependents from 10 percent to 50 percent. Business at her 50-seat restaurant has been stagnant, she said, in part because competitors that don’t offer their workers health insurance have been slashing their prices. She is hopeful that her insurance costs will go down further in 2014, when key provisions of the new law take effect: Individuals will get income-based subsidies to help pay for their insurance, and state-based exchanges will allow small businesses or their workers to buy plans at prices possibly kept in check by the competition.
But until then, Parker expects her costs to keep rising. “Our CPA sat down with us and said, ‘If this keeps up, you’re going to go bankrupt,’ ” she said. So paying for more of their insurance, she said, “is something our employees are going to have to get used to.”