Firms Weigh Paying Workers to Purchase Health Coverage
About a third of California employers that offer their workers health-care coverage are considering switching to a so-called defined-contribution approach that pays employees to buy their own insurance while reducing costs for companies, according to a survey to be released today.
The survey of 857 companies by the Kaiser Family Foundation also found that about 60% of California employers offered health coverage last year as they sought to attract and retain workers in a tight job market, a 12% increase over 1999.
Although the increase was good news for California workers, it is already becoming outdated as the economy slows and health insurance premiums rise, said Larry Levitt, vice president at the Kaiser organization, which is not affiliated with the giant Kaiser Permanente health maintenance organization. Nationally, 67% of 1,887 companies surveyed reported that they offer health insurance plans, a 6% increase from 1999.
The survey, which was completed between May and September, showed that some California employers instead are starting to consider switching to a defined-contribution benefit instead of offering group coverage. In California, 33% of employers surveyed reported that they are very or somewhat likely to make the switch to a defined-contribution plan, compared with 20% nationally. The question about defined-contribution options was not asked in previous state or national surveys, Levitt said.
“Most California employers know that to attract employees, they need to offer a health insurance option,” Levitt said. “However, as premiums rise, offering coverage becomes a burden. By shifting this responsibility to the workers, employers ease that burden.”
In the end, workers usually absorb the added costs of choosing more-costly plans, Levitt said. Some employees may fall through the cracks, though, confused by the complicated health insurance system, he said.
Terrie Beck, human resources manager at Eskaton, a Sacramento-based operator of assisted-living facilities with 1,000 employees, said the company has provided one version of the defined-contribution plan since 1991. She said that employees have had to absorb some costs because of increased premiums in the last year, but that the company has continued to receive positive feedback.
“I wouldn’t be surprised if more California companies opt for a version of defined contribution in the next year,” Beck said. “The plans can be cost-effective.”
Kaiser found that the overall cost of health insurance in California rose by 6% in 2000. However, the average amount that employees contributed to their coverage did not. California employees averaged $20 per month for single coverage and $113 for family coverage, compared with $21 and $117, respectively, in 1999. Nationally, the rates averaged $28 and $138, respectively, in 2000.
In its California survey, the foundation questioned 857 companies with three or more employees, with a margin of error of 4%.
