U.S. employers push increase in cost of healthcare onto workers
As employers struggle with rising healthcare costs and a sour economy, U.S. workers for the first time in at least a decade are being asked to shoulder the entire increase in the cost of health benefits on their own.
The average worker with a family plan was hit with 14% premium increase this year, pushing the bill to nearly $4,000 a year, according to a survey by the nonprofit Henry J. Kaiser Family Foundation and the Health Research and Educational Trust.
That is the largest annual increase since the survey began in 1999 and a marked change from previous years, when employers generally split the rise in the cost of premiums with their employees.
The average employer contribution to a family plan did not go up at all this year, meaning the entire increase was borne by workers.
At the same time, nearly a third of employers reported that they either reduced the scope of benefits they are offering this year or increased the amount that workers must pay out of pocket for their medical care.
Workers saw average copayments for routine office visits increase 10% and deductibles continue their surge upward.
In 2010, more than a quarter of American workers with employer-provided health coverage were in plans with deductibles of at least $1,000.
“It’s really bad news for everybody,” said Helen Darling, president of the National Business Group on Health, an organization of large employers that provide coverage to about 50 million workers, retirees and dependents.
Overall, premium growth slowed slightly this year to 3%, with the average annual cost of a family health plan reaching $13,770. Workers picked up 30% of that bill. The average plan for an individual cost $5,049.
The squeeze, reported by employers between January and May, largely reflects the fallout of the ongoing economic slowdown and may be ameliorated in future years as the new healthcare law is implemented.
But it could further complicate the Obama administration’s efforts to rally support for the law, which is expected to do relatively little in the short term to contain rising medical bills.
“There have been times when employers have been able to absorb costs. This is not one of those times,” said James Gelfand, health policy director at the U.S. Chamber of Commerce, a leading critic of the new law.
The law, which focused on expanding coverage for Americans who don’t get insurance through work, was designed to largely preserve the existing employer-based healthcare system.
Independent analyses of the law estimate that most Americans will continue to get insurance through their employer, as about 157 million do now.
Administration officials Thursday pointed to two new studies from the Rand Corp. and the Commonwealth Fund that predicted small businesses in particular would probably expand coverage in coming years, in part with help from billions of dollars of in new tax credits.
“We have really just begun our efforts,” said Nancy-Ann DeParle, director of the White House Office of Health Reform, emphasizing the growing number of tools government regulators have to control insurance premiums.
The Kaiser survey found that the percentage of firms offering health benefits rose to 69% from 60% this year, an unexpected increase that analysts speculate may reflect the failure of many businesses that didn’t offer benefits.
But the survey suggests that the coverage workers are being offered is becoming increasingly unattractive as employers try to control their costs in the down economy.
“We were all so focused on the reform debate that I think we took our eyes off the fact that what we call heath insurance in this country is changing,” said Kaiser foundation President Drew Altman. “What workers get looks less and less like the comprehensive coverage their parents had.”
Since 2005, workers’ contributions to insurance premiums have shot up 47%, far outpacing the 18% increase in wages over the same period, according to the survey.
The squeeze on employees at small and medium-sized businesses has been particularly intense, as these employers face the biggest challenges providing their workers with health benefits.
Nearly half of all workers at firms with fewer than 200 employees are now in plans with deductibles of $1,000 or more.
The bleak statistics do not reflect some more-promising changes in the way employers are designing their health benefits, said Paul Fronstin, senior research associate with the nonpartisan Employee Benefit Research Institute.
Some large companies, for example, are raising copays for specialist care while lowering them for primary care in a bid to encourage workers to use more preventive care, which is typically less expensive in the long run.
“There are more things going on than just slashing benefits,” Fronstin said.
The new law may also help bolster the benefits workers get from employer-provided coverage by prohibiting plans from imposing lifetime benefit limits and by requiring them to cover dependent children under age 26.
If employers substantially raise deductibles and copays or scale back their contribution to employees’ premiums by more than 5 percentage points, the health benefits would be subject to even more mandates.
These include covering preventive services such as cancer screenings with no copays or other cost sharing.
The added protections for workers have been widely praised by consumer advocates. They are expected to further push up premiums, at least for the short term, however.
And businesses and workers probably will have to wait longer for the benefits of provisions in the new law designed to improve care and make it more efficient.
That will require patience, said Kaiser’s Altman.
“Health reform may not be perfect,” he said. “But when it comes to cost containment, it is the only game in town, as opposed to the current strategy, which by default seems to only be shifting more costs onto workers.”