U.S. employers held health benefit cost increases to about 6% in 2008 for a fourth straight year. This statistic is deceptive and would lead one to believe that health care insurance premiums are leveling out. The fact is that employer cost increases have held at 6% because more cost has been shifted to the employees.

The median deductible required by employers for individual coverage in preferred provider organization (PPO) health plans DOUBLED to $1000 from 2007 to 2008, according to the National Survey of Employer-Sponsored Health Plans conducted annually by HR consultancy Mercer. In 2000, only about half of employers imposed a deductible for PPO coverage (compared to about four-fifths in 2008), and when they did, the median amount was just $250. PPOs are the most popular type of group health plan, enrolling 69% of covered employees.

What makes this finding noteworthy is that it refers to traditional PPO deductibles reaching as high as $1000, not high-deductible health plans. $1000 deductibles are the norm for high-deductible health plans that allow an employee to contribute to a tax-free health savings account (HSA) which is used to pay for health care expenses. These consumer-directed health plans are growing rapidly and illustrate the change that has taken place in the employer health care insurance industry where employer costs have stabilized while employee costs continue to increase at a double digit annual rate. Raising the deductible has become the fallback for employers faced with cost increases they can’t afford.

Source: HR Magazine, January 2009, Stephen Miller

According to a study conducted by the consulting firm Mercer, employers struggling to deal with escalating health costs will increasingly shift benefits’ expenses to employees.

This is a continuing trend. In fact between 2003 and 2007 the
median family deductible in preferred provider plans increased from $1000 to $1500. Mercer found that of those organizations that were going to pursue cost reductions, 60% indicated they would raise deductibles, coinsurance, copayments, and/or out-of-pocket maximums.

Another 19% reported that they will add a high deductible plan and employee spending account such as a health savings account (HSA). It’s estimated that heath plan costs will increase by 8% in 2009. Small employers’ costs could go up 10%. In response more small employers are discontinuing their plans or not instituting them in the first place.

As employers, employees, and political candidates struggle with what to do about the country’s health insurance mess, results are beginning to come in from Massachusetts.  You’ll remember that Massachusetts passed a ground breaking law in 2006 that required nearly all residents to get coverage, created subsidized programs for poorer citizens, and established a Health Care Connector plan for the higher paid to obtain lower cost insurance.  Results of the program are good so far.  They include:

• The percentage of uninsured adults decreased from 13%- 7%.   The percent of uninsured poor citizens dropped the most, but significant drops were seen among wealthier individuals as well.
• Poorer adults were more likely to see doctors and dentists than they had in the past.
• 350,000 more people became insured.
• People have paid less for medically related out-of-pocket expenses.
• 95% of Massachusetts taxpayers have become insured.  Of the 5% who weren’t, over ½ were found to be financially able to buy insurance and were “fined” for not doing so.

More information can be found in a June 3 USA Today article found at:
http://www.usatoday.com/news/nation/2008-06-03-mass-healthcare_N.htm

You’ve no doubt seen news reports of Americans seeking medical care abroad. They’re either uninsured, underinsured, or simply trying to save money by having surgery in Latin America, Thailand, or India. As you might have guessed this trend hasn’t gone unnoticed by corporate America seeking to save money on their health care or insurance carriers hoping to roll out a new product.

According to a recent report by the International Foundation of Employee Benefit Plans, 11% of surveyed employers cover medical tourism. Those surveyed were Certified Employee Benefits Specialists and therefore part of large organizations. However, don’t be surprised to see this trend extend beyond the very large companies to others seeking to find another way to control costs.

A couple of other interesting findings from the survey included the increase in coverage (from 1999-2007) in other types of care that haven’t been considered mainstream. Acupuncture coverage increased from 14% to 34%, massage therapy 8% to 13.5%, and nutrition therapy 5% to 12.8%.

Employers contemplating cutting back on medical benefits might want to mull this: A new survey shows that workers place an extremely high value on health care coverage.

In fact, according to a survey of 1,200 adults sponsored by the Center for State and Local Government Excellence, 84 percent of the respondents said that health insurance has become a “very important” characteristic when choosing a new job.

In fact, medical insurance outranked all other 14 benefits and offerings in the survey. Remarkably, pay ranked 10th on the survey—right below “being creative and intellectually stimulated.”

Another benefit—the corporate pension plan—ranked fourth, cited by 76 percent of respondents as being most important when evaluating a potential job.

Cost increases for U.S. group health care plans continue to hold steady as more employers take steps to keep spending under control. Most often, employer healthcare spending controls results in higher employee out of pocket spending via higher copays and deductibles. 

Unfortunately it’s the small employers with under 200 employees that feel the rising premium affects the worse and as a result fewer and fewer are able to afford to offer employee healthcare benefits.

Group health plan costs increased 6.1 percent this year to an average of $7,983 per employee, up from $7,523 last year, according to a survey of nearly 3,000 employers released last month by Mercer.

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