Employers Rapidly Shifting Health Care Costs To Workers

As the year-long health care debate approaches its end game in Washington, opponents of reform are being buffeted by a double-whammy of bad news. La

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As the year-long health care debate approaches its end game in Washington, opponents of reform are being buffeted by a double-whammy of bad news. Last week, a Goldman Sachs analysis documented insurance rates for individuals jumping by up to 50% in some markets. Now, a new survey of large employers found that 56% will hold workers responsible for a greater share of health care costs next year. Coming on the heels of studies showing companies dropping workplace coverage altogether, the data reveal a system of employer-provided health insurance teetering on the brink of collapse.

As the Washington Post reported, the study National Business Group on Health of 507 large companies with over 1,000 employees each found that:

Many say they may charge more to cover spouses, tighten eligibility standards for their health plans and dispense financial rewards or penalties based on the results of certain lab tests. At some companies, overweight employees could be excluded from the most desirable plans.

Meanwhile, employees at many companies can expect significantly higher premiums, deductibles and co-payments.

That cost-shifting will take a number of forms. Twenty-eight percent of employers plan to use spousal surcharges next year, up from 21 percent this year. Meanwhile, 12 percent of employers plan to offer only high-deductible coverage next year. And the percentage of firms considering employee biometric screening and health care appraisals to incentives for hitting weight, blood pressure and cholesterol targets is growing rapidly.

The NBGH survey is just the latest symptom of the rapidly deteriorating system of employer-provided health insurance coverage. A 2007 report from the Economic Policy Institute showed a dramatic decline in employer-provided health care. That drop-off from 64.2% of Americans covered through workplace insurance in 2000 to just 59.7% in 2006 alone added 2.3 million more people to those without coverage. Census data since showed workplace coverage dipped further in 2007, down to an alarming 59.3%. A recent Thomson Reuters survey put the figure for 2009 at a stunning 54.6%. (Data from the U.S. Census revealed that it was only the expansion of government programs including SCHIP and Medicaid which offset the erosion of employer coverage in 2008.)

As the Washington Post also detailed in September, another survey by the Kaiser Family Foundation found that the grim outlook for employer-provided health insurance is growing more dismal still:

Forty percent of employers surveyed said they are likely to increase the amount their workers pay out of pocket for doctor visits. Almost as many said they are likely to raise annual deductibles and the amount workers pay for prescription drugs.

Nine percent said they plan to tighten eligibility for health benefits; 8 percent said they plan to drop coverage entirely. Forty-one percent of employers said they were "somewhat" or "very" likely to increase the amount employees pay in premiums -- though that would not necessarily mean employees are paying a higher percentage of the premiums. Employers could simply be passing along the same proportional share of the overall increase that they did in 2009.

To be sure, Americans' health care expenditures are spiraling out of control, expanding at triple the rate of wages. That annual tab now tops $12,000. Of that, a recent analysis by the Center for American Progress found that "8 percent of families' health care premiums--approximately $1,100 a year--is due to our broken system that fails to cover the uninsured."

And with successful Republican obstruction of Democratic health care initiatives, those jaw-dropping costs would only continue their steep climb. A report last year from the consulting firm PricewaterhouseCoopers forecast employers will face a 9% increase in health insurance costs in 2010. 42% of those business surveyed will pass at least some the new burden on to their workers. As PWC's Michael Thompson concluded in June:

"If the underlying costs go up by 9%, employees' costs actually go up by double digits," he said, noting that will have a "major, major impact" when many employers also are freezing or cutting pay.

Here's a snapshot of just how "major" that impact will be for American families. Pointing to data from the actuaries at the Centers for Medicare and Medicaid Services, the Center for American Progress warns that per capita medical costs are forecast to rise by 71% over the next decade. That would catapult the cost of the average family's insurance policy from $13,000 a year to over $22,000 by 2019.

As the Post detailed, business groups themselves are also ringing the alarm bell. A new report from the Business Roundtable concluded, "If current trends continue, annual health-care costs for employers will rise 166 percent over the next decade -- to $28,530 per employee." Antonio M. Perez, chief executive of Eastman Kodak and a leader of the Business Roundtable concluded:

"Maintaining the status quo is simply not an option. These costs are unsustainable and would put millions of workers at risk."

And not just workers, but for all Americans. With 50 million uninsured, another 25 million underinsured, 1 in 5 Americans already postponing treatment and medical costs fueling 62% of personal bankruptcies, the crisis of the employer-based system couldn't come at a worse time. But while Democrats are trying to get Americans the health care reform they so badly need, Republican leaders have another plan: go to the emergency room.

(This piece also appears at Perrspectives.)

About Jon Perr

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