Employers are dramatically shifting healthcare costs onto workers, so much so that the average annual deductible for an individual surpassed $1,000 for the first time this year, according to a new study.
Millions of workers -- whether employed by small, medium or large companies -- must now pay an average of $1,001 out of their own pockets before their health insurance coverage begins paying a share of the expenses. That’s up 17% from $859 last year.
“Raising the deductible has become the fallback for employers faced with cost increases they can’t handle,” said Laura Baker, a consultant for Mercer, the benefits consulting firm that conducted the annual survey of about 2,900 companies. “It’s the easiest way to reduce cost without taking more out of every employee’s paycheck.”
The survey findings applied to preferred provider organizations, offered in many employee group benefit packages. Health maintenance organizations, another popular benefit option, don’t have deductibles.
Employers say workers are having to pay more because healthcare coverage is more expensive, up 6.3% to an average of $8,482 per worker this year, according to Mercer. (In Los Angeles, costs rose 5.4% to $7,958 per worker for medical, dental and vision coverage.) To offset steep premium increases, companies are opting for higher deductibles.
Baker said employers were bracing for potentially bigger increases next year. “Historically, downturns in the economy have often correlated with higher medical trends,” she said.
But higher deductibles could prompt cash-strapped workers to think twice about visiting a doctor, and healthcare experts have long argued that people who avoid treatment end up having bigger medical problems -- at greater cost -- later.
“What this says is that the employers are desperate,” said Len Nichols, an economist who heads the health policy program at the New America Foundation, a nonpartisan Washington think tank. “They are doing everything they can to reduce premium growth this year. But it’s not thinking 10 years down the road.”
There is mounting evidence that people are skipping checkups, tests and other medical care to cut their own expenses. Physicians and hospitals are reporting a drop in patient visits and revenue and a rise in late payments and unpaid bills.
A recent Kaiser Family Foundation survey found that the shift toward higher deductibles had been most dramatic at firms with three to 199 workers, where more than 1 in 3 workers must pay at least $1,000 out of pocket before their plan kicks in.
That kind of “cost sharing discourages people from using services,” said Gary Claxton, Kaiser vice president and co-author of the benefits study. “The more cost sharing there is, the more it’s going to be discouraged. And when they are already worried economically, that’s got to amplify the effect.”
But small-business owners are struggling to find ways to control the escalation and stay afloat, said Michelle Dimarob, legislative affairs manager for the National Federal of Independent Businesses.
“This is very reflective of the tough economic times we’re in,” she said. “Healthcare is truly a pocketbook issue for both employers and employees.”
The trend toward higher deductibles could, in the long run, drive costs up by prompting people to wait until they are seriously ill before seeking care, said Anthony Wright, executive director of Health Access California, a patient advocacy organization based in Sacramento.
“It puts the incentives in the wrong places,” Wright said. “It takes incentives away from ongoing and preventative care.”
As benefits manager for Santa Monica-based American Golf Corp., Jeff Kuehn said he wanted to avoid taking another big bite out of employees’ paychecks. At the same time, he didn’t want high deductibles to discourage employees from getting preventive care.
As a result, the company, which manages golf courses across the country, will implement a health plan next year that requires a small co-payment for preventive care, such as checkups and vaccinations, but carries deductibles of up to $1,250 for more specialized services, such as nonroutine diagnostic tests.
“We want to keep people out of bankruptcy and encourage preventive care,” Kuehn said. “We’re hoping people will start going in and getting their annual exams. We hope they will go in and get their annual flu shots. We hope people will go in and take care of themselves. And we hope we will have a healthier population in the long run, and that will mean less costs for us.”