Employers Accelerate Health Care Cost-Shifting

Employers continue to boost employee deductibles, particularly for out-of-network services, as health care costs show no signs of easing, according to a survey released last week.

Twenty-two percent of employers imposed deductibles of at least $1,000 this year for in-network services for their health care plans that had the largest enrollment, up from 16 percent last year and just 8 percent in 2008, according to PricewaterhouseCoopers.

Double that percentage of employers—44 percent—imposed deductibles of at least $1,000 for out-of-network services, up from 29 percent in 2010. As recently as 2008, only about 20 percent of employers imposed deductibles of $1,000 or higher on out-of-network services, according to the survey of more than 1,700 employers.

“The biggest change in the past two years has been the increase in cost-sharing with employees,” said Michael Thompson, a Pricewaterhouse principal in New York. Increased cost-shifting has occurred as increases in health care costs continue to outstrip increases in corporate profits and employee wages, he said.

Rising health care costs add pressure on employers already affected by the difficult economy, but boosting employee cost-sharing may make employees more careful consumers of services, Thompson said.

At the same time, employers have limited increases in employees’ premiums. For example, 31 percent of employers required employees to pay less than 20 percent of the total premium for family coverage this year, virtually unchanged from last year, according to the survey.

“Employers have been careful not to shift premium costs to employees, but have decided that the better way to shift costs is to require those who use health care services to pay more,” Thompson said.

The survey also found a surge in employees enrolling in high-deductible, consumer-driven health care plans.

This year, 17 percent of employers reported that their greatest employee enrollment was in high-deductible plans, up from 13 percent in 2010 and 8 percent in 2009. By contrast, 57 percent of employers reported that traditional preferred provider organization plans had the highest enrollment this year, down from 63 percent last year and 60 percent in 2009.

Meanwhile, Pricewaterhouse projects that medical costs will go up 8.5 percent in 2012, up from an estimated 8 percent this year and 7.5 percent in 2010, with several factors boosting costs.

Health care plans and employers say utilization of medical services is rebounding after “surprisingly low growth” last year and will continue to do so next year as “a result of the release of pent-up demand during the recession,” Pricewaterhouse noted.

Continuing health care provider consolidation also will boost costs in the year ahead, Pricewaterhouse said.

On the other hand, a factor that will help to prevent costs from climbing even more is the upcoming loss of patent protection for costly brand-name drugs, allowing the substitution of lower-cost generics. On average, generics cost about 30 percent of the price of brand-name drugs.

This year, nearly $23 billion in drugs—including Lipitor, the world’s best-selling prescription drug—go off-patent. Another $28 billion in drugs go off-patent in 2012, according to Pricewaterhouse.

In the area of health care reform, more than 90 percent of employers said they have felt the financial impact of a provision in the federal law that requires extending coverage to employees’ adult children up to age 26. For most employers, that provision went into effect Jan. 1. Nearly all employers had to amend their plans to comply.

Down the road, a fairly high percentage—about 35 percent —of employers expect a significant financial impact from a health care reform law provision that will impose a 40 percent excise tax on the most costly group plans, according to the study.

That tax, to be paid by insurers and third-party claims administrators—but almost certainly passed on to employers—will apply to premiums that exceed $10,200 for single coverage and $27,500 for family coverage. The tax will begin in 2018.    

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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