Rising costs increase cost-sharing requirements
The economic slowdown and a continued sharp rise in health care costs have combined to create increased financial pressures on the nation’s workers, according to a recent survey by The Kaiser Family Foundation and the Health Research and Educational Trust, of Washington, DC. The initiative, which surveyed 3,262 public and private firms ranging in size from three to more than 300,000 employees, yielded the following findings:
• Health care premiums increased 12.7%, the highest increase since 1990. Single premiums are now, on average, $3,600 for single coverage and $7,954 for family coverage.
• The amount employees pay for coverage has risen substantially. For single coverage, employees now pay an average of $454 per year — a 27% increase, or $95 more than the previous year. The employee share of premiums for family coverage averaged $2,084 — a 16% increase, or $283 more than the previous year.
• Deductibles for preferred provider organization in-network providers rose 37% to $276 in 2002; up from $201 last year.
• For the first time in four years, more workers experienced reduced benefits than increased benefits; 17% of covered workers are in firms that report they offered employees a lower level of health benefits than last year.
"With health costs rising rapidly and no solution on the horizon, workers can expect to pay more and get less coverage," predicted Drew Altman, PhD, president of the Kaiser Family Foundation, when announcing the survey results.
This trend, say observers, presents workers with a triple whammy to their health and well-being. First, seeing their employers slash benefits can be detrimental to employee morale. On the other side of the coin, the increased financial burden can be an additional stress factor for American workers. And finally, as health care premiums become prohibitive for employees, we may see a drop in health care utilization.
Even though they are at least indirectly the source of this stress, employers are not unaware of the impact it may have on employees, notes Erin Holve, MPH, MPP, senior policy analyst at the Kaiser Family Foundation.
"When you talk to employers about the benefit of greatest concern, they say health care," she reports. "That indicates they are probably also worried about the issue on the employees’ behalf. The cost pressure is significant for them, but they probably also recognize it will not be easy for the employees."
Holve notes that employees are feeling a dual pressure because of rising premiums and higher copays. "This year, we saw that the dollar amount workers pay for premiums rose substantially. The additional burden this year for a single worker is another $100 year; and for a family, it’s $300 this year — but that just represents what’s coming out of their pay packet on a monthly basis," she observes. "It’s really a double whammy; the worker is hit not only on the monthly premium, but when they actually use their coverage as well. The cost of physician visits in HMOs is going up, as are prescriptions, so deductibles are also going up. It’s kind of a multi-part story; you’re paying more, but what you get for it is actually less."
What impact might this have on utilization? "There was a large study by Rand Health Insurance about 15 years ago that demonstrated the effect of higher prices on utilization," says Holve. "This can mean an impact on when patients seek appropriate care. As costs increase, at what point will they say it’s prohibitive? At some point, they will decide not to go for a follow-up or a prescription. I have significant concern that if costs continue to increase they will be prohibitive."
John R. Gabel, vice president for health system studies at the Health Research and Educational Trust, does not paint a hopeful picture. "Three more years of this type of inflation could bring family coverage to nearly $11,000," he predicts.
Those hit hardest, adds Holve, are the low-income workers. "If you make $50,000 and have to pay a couple hundred extra dollars, it may not affect you that much," she says. "But if you make $30,000 and you’re supporting a family, it really starts to hurt. These costs can really hit people."
Other dynamics at work
Other survey findings took note of interesting dynamics at work. For example, responses indicated that benefits are becoming more confusing to employees, which could mean those benefits may not be used optimally. "Overall, more than one-third of the employers said their employees found benefits much more confusing compared with a few years ago, and 32% said they were a little more confusing," Holve reports. "I think that’s due to the double-whammy cost increases, as well as having providers move in and out of networks."
Interestingly, employers also recognize that increased premiums make it harder to attract and retain employees. So far, however, that hasn’t stopped them from passing on increased health care costs. "It’s still an expensive proposition to attract and retain people," she says, "and employers will have a much easier time attracting and retaining workers if they do not pass along additional costs. I’d be surprised if many employers come to this conclusion in the short term, but if this is really a driving force, then they will absolutely recognize it [in the long term]. They may ultimately return to offering these benefits, because it’s a smart financial move."
Of one thing Holve is certain: You can put a lot of stock in what the employers are saying about trends in health care costs. "We have tested past predictions; this year is even more serious than they predicted," she says. "The employers said they would raise costs to employees and they actually did so, so you can believe what they say."
So what do they see down the road? "When we look at trends for the future, employers say that next year will not be a whole lot better; the outlook is a little bleak," Holve concludes.
[For more information, contact: Erin Holve, MPH, MPP, senior policy analyst, Kaiser Family Foundation, 1450 G St., Suite 250, Washington, DC 20005. Telephone: (202) 347-5270, ext. 351.]