Large Companies Want Employees to Share Health Care Burden

Efforts to make employees shoulder more of the health insurance burden by managing their own health care spending and becoming tougher consumers has not yet resulted in significantly reduced costs, according to a new study.

The annual survey of employer health benefits found that premiums for employer-sponsored health insurance rose by 9.2 percent in 2004, a lower increase than the two previous years but a rate at which health costs outpaced inflation and wage increases. The average annual premium for a worker with single coverage is $4,024, with the employer contributing $3,413; for family coverage, the premium is $10,880, with the employer paying $8,167. The report by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust was based on a poll of 2,995 randomly selected public and private employers.

Cost-shifting continues
Two other studies suggest that companies will shift more health care costs to their employees. A Robert Wood Johnson Foundation poll of 600 business owners and benefits managers shows that companies expect health care costs to rise 12 percent over the next year and that they will require employees to bear an average of 21 percent of the increase. And a survey of 1,883 employers released by Mercer Human Resources Consulting and Marsh Benefits stated that 62 percent of large employers will shift costs to employees in 2006.

The major reason consumer-driven health care hasn’t lowered company bills is that too few workers have signed up, according to the Kaiser report. About 20 percent of employers offer high-deductible health plans, which require deductibles of $1,000 for a single account and $2,000 for a family. Only 3.9 percent of employers offering health plans also make a contribution to a health reimbursement arrangement or allow employees to establish health savings accounts.

About 1.6 million workers are enrolled in HRAs, while 810,000 have an HSA. The goal is to make workers more sophisticated consumers who demand lower-cost and higher-quality health care. But with so few employees controlling their own health care spending destiny, cost reductions have been modest to nonexistent.

“It’s really not something yet that can influence the overall health care bill,” says Drew Altman, president and CEO of the Henry J. Kaiser Family Foundation. “That’s not a statement based on the merits of the approach; that’s a statement based on the math.”

Although individual health care accounts haven’t taken off, about one-third of companies with more than 5,000 employees offer high-deductible options. More than 40 percent of firms with more than 200 employees will seek premium increases next year, according to the Kaiser report.

But companies don’t think that making employees more market-oriented through higher deductibles, premiums and co-payments will be a panacea. “We expect the prevalence of these consumer-driven approaches to grow, despite the fact that only 16 percent of employers say that they believe that these plans will be ‘very effective’ in controlling health care costs,” the report states.

One expert who contributed to the Kaiser study warned that consumer-driven health care may result in unintended consequences.

“Long-term costs for resulting acute care could rise if preventive care or other chronic disease management is delayed or avoided by those individuals who have high out-of-pocket costs,” says Mary Pittman, president of the Health Research and Educational Trust.

Regardless of the strategies used to reduce health care spending, Altman is pessimistic about the future. “What we see is the slow but perceptible fraying and deterioration of our employer-based health insurance system,” he says.

More information on health care benefits is available online.

—Mark Schoeff Jr.