Companies Plan to Pass Along Rising Health-Care Expenses

The hot economy has kept most employers from passing on rapidly rising health insurance costs to employees, but next year workers probably will get hit with higher deductibles, co-payments and premiums, according to a study being released today by a benefits consulting firm.

About 40% of the 3,300 companies surveyed by William M. Mercer Inc. say they will raise the amount employees must pay for their share of health insurance premiums in 2001. About 17% say they will raise deductibles and co-payments.

“This is the year that employers will say, ‘Enough,’ ” said Kirby Bosley, who manages Mercer’s health-care consulting practice in Los Angeles. Employers are making the changes as a result of two convergent trends: a two-year rise in health-care costs, combined with their own reluctance, over the last two years at least, to offset the increase by reducing benefits to employees in a tight labor market.

Nationwide, employers paid on average 8.1% more in 2000 than in 1999 for health insurance for employees; in Southern California, they paid 7.3% more.

Now, with the economy slowing and an 11% hike in premiums and other costs expected for next year, many companies are willing to risk alienating employees by increasing fees for health care.

The survey showed publicly traded companies not in fields where they must compete heavily for labor are the most likely to raise prices.

“In companies where shareholder demands and the pressures of global competition are driving the bus, controlling runaway expenses takes priority,” said Bosley, who speculated that high-tech, entertainment and unionized manufacturing industries would be less likely to pass on health-care costs.

In addition to charging more from current employees, many companies are continuing to drop health coverage for retirees.

In 2000, 31% of employers offered health-care coverage to retirees younger than 65, down from 35% the year before. And just 24% offered coverage to those old enough to qualify for Medicare, down from 28% in 1999.

The lack of coverage is significant because even though the retiree may qualify for Medicare, the government program does not cover prescription drugs and has no annual limit on the co-payments required for many common medical services.