Thursday, March 5, 2009

Health Care and Insurance Premiums

Health insurance premiums by 2016 are undoubtedly going to take a big jump. The US Public Interest Research Group has predicted that costs for employer sponsored family health insurance will increase from $11,381 (2006 figure) to $24,291 by 2016. The Group sees inappropriate, ineffective and uncoordinated care as a driver of this rise, along with excessive administrative costs and drug/device marketing costs. Currently, they assert, that one healthcare dollar in three goes to administration and marketing-totaling $730 billion.

Did you know that almost 20% of working Americans have no health insurance? MSNBC reports, according to About.com, the rising cost of healthcare premiums in the workplace is taking its toll. In fact, the numbers may be even worse than this, because this report was based on a census taken in 2007. Given the present state of the economy, the number of uninsured workers is bound to increase. What does this mean for people with chronic pain? Well, it means that they are far less likely to go to the doctor for anything other than an emergency. This potentially means that breakthrough pain or other short-term illnesses that may cause pain to increase will go untreated. It also means that prescription drugs may become too expensive to pay for out of pocket. In short, these people will not get adequate care for their chronic pain condition. It seems unfair that so many people might have to make the choice between buying groceries or paying for their chronic pain medication.

According to Medical News Today, an increased number of employees in 2009 will pay more for health insurance -- and receive less coverage in some cases -- as employers "grapple with the financial fallout of rising medical expenses and diminished revenue and profits" during the current economic recession, the Washington Post reports. The recession "is making it more difficult for many employers to subsidize health care costs at previous levels," and in 2009 "benefit packages contain the biggest increases for workers since the recession of 2001," according to the Post. In 1999, employers covered about 90% of the cost of health insurance for employees, compared with 73% today, and the percentage likely will decrease to 70% over the next few years. A recent Mercer survey found that 44% of almost 2,000 large employers plan to increase the share of health insurance premiums paid by employees in 2009, compared with 40% in 2008. In addition, according to a recent Corporate Executive Board survey, one-fourth of 350 large employers increased health insurance deductibles by an average of 9% in 2008, and 30% plan to increase deductibles by an average of 14% in 2009. In an effort to reduce costs, an increased number of employers have begun to offer high-deductible health plans linked with health savings accounts and focus on wellness programs "aimed at keeping workers healthy through diet and exercise," the Post reports.

Rising health care costs – and the steps employers are taking to cope with them – are worsening the income gap in the U.S., according to McKinsey Global Institute researchers as reported by the Wall Street Journal. Rising health-insurance premiums are accounting for a disproportionate share of the lowest-paid employees’ compensation compared to higher-income employees. The researchers found that the ratio of employer-paid health-insurance premiums to total household income was 20% for those who were insured in the lowest-income group. Of that group, which earned $14,800 a year on average, only 22% were covered at all. That 20% stands in stark contrast to the 3.3% health - insurance - premium - to - income ratio for the highest income group, which averaged $210,000 annually. Nine out of 10 of those workers are insured. The disparities in income and coverage are also reaching workers’ out-of-pocket expenses. As the highest-earners’ salaries increased over the years, so did their health care benefits and the types of services that were covered. As a result they paid very few additional health - care costs. A similar trend took place with higher-middle and lower-middle income groups, but at a slower rate, meaning their out of pocket costs grew a bit. As for the lowest income group, “incomes have been stagnant, and their employers are less likely to pay for their health insurance. This group is finding any health care difficult, if not impossible, to afford,” the researchers concluded. Using the most recent data from 1966 to 2005, the researchers noted that health insurance premiums grew 5% a year. And as premiums rose, enrollment in the employer-sponsored plans has dropped or remained the same, especially in regard to the middle class. “Some employers are offering more comprehensive benefits to attract and retain better workers. At the same time, some companies have been prompted to withdraw the offer of employee health care benefits altogether; others have had to limit the number of employees eligible for benefits…Put another way, employers are spending more on health care per employee but for fewer employees.”

According to Towers Perrin, data from a recent survey indicates that the business and social impacts of rising health care costs still loom large, but also that leading companies are successfully mitigating that threat through a variety of health-focused management techniques that are paying off in significant ways—and point toward broader solutions to the cost crisis. The most striking result of the survey is the contrast between the high- and low-performing companies. The high performers will pay, on average, 14% less in 2009 a differential that quickly adds up to millions of dollars in annual savings for companies and for their employees. While high-performing companies spend almost $1,500 less per employee overall, $350 of those savings, on average, are shared with employees in the form of lower contributions. This shared 'health dividend' also creates important workforce performance advantages, as reported by these organizations such as high employee engagement. Overall, the high performers are reaping a health dividend that can be a source of true competitive advantage and a model for the health care reform debate." According to Towers Perrin's annual Health Care Cost Survey, the average corporate health benefit expenditure in 2009 will be $9,660 per employee-an increase of 6% over 2008 figures. The 6% growth rate will make 2009 the fifth consecutive year of single-digit percentage increases. However, many companies and their employees will still face record-high dollar costs in 2009, which is sure to deepen concerns about affordability, particularly for lower-wage workers and pre-65 retirees. Underscoring the growing affordability gap, the Towers Perrin survey database shows that total health care costs have increased by 33% since 2004, with the employee share increasing by 42% during the same period.

As in previous years, the survey indicates that employers will shoulder the lion's share of the 2009 cost burden, subsidizing, on average, 78% of premium costs and asking employees to cover the remaining 22%, plus usage-based copays, deductibles and coinsurance, according to Towers Perrin. However, while the employee percentage share has held steady in the last few years, the actual dollar burden has grown due to the ever-increasing cost base and the added impact of benefit design-related increases in out-of-pocket costs. Analyzing the 2009 data by coverage level, the average reported cost of medical coverage for active employee-only coverage is $4,860 per year and, for family coverage, $14,244 per year. While these numbers are impressive in themselves, the impact of current health care costs and cost increases is starkly evident when compared with wage increases over the past eight to 10 years an analysis that reveals a growing affordability gap and significant erosion over time in compensation values and employee purchasing power. And even though employees at high-performing companies are doing better overall, they are still feeling the legacy impact of years of rising costs, despite the best efforts of their employers today to keep costs down. Much more detail can be found at http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master_Brand_2/USA/Press_Releases/2008/20080924/2008_09_24b.htm&country=global .

Fifty-nine percent of U.S. businesses in 2009 intend to increase employees' deductibles, copayments or out-of-pocket spending limits, according to preliminary data of a national survey released on Thursday by Mercer, the AP/Houston Chronicle reports. The preliminary results included the responses of about half of the 3,000 large companies surveyed who responded. The survey found that health care costs for workers and employers will increase by an estimated 5.7% in 2009, the same rate as this year. According to Mercer, health care cost growth has been about 6% since 2005, and while the rate is lower than the double-digit increases in previous years, it still is growing at a faster rate than inflation or workers' wages, noted by EMaxHealth.

Overall, health insurance premiums are going up, and they go up every year. Some years the increase is greater than the year before, and some years the increase is not as bad. The costs, though, continue to increase each year regardless of the net gain in price. As part of your employee compensation each year, you should discuss this issue with your HR Director to find ways that will help you contain the costs you must bear for coverage. It's a smart idea to research this issue in advance of each new year before open enrollment. After that, it's too typically too late to change the price until the next year unless you have a qualifying event.

Until next time. Let me know what you think.

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