Get ready to pay more for your health care coverage at work.
As open enrollment season gets under way, two separate studies say that many employers will hike the proportion that workers contribute to their premiums and raise copayments and deductibles.
A small but growing number of employers are also giving discounts to workers who quit smoking or reduce their risk for chronic disease by losing weight and controlling hypertension. The goal, employers say, is to encourage healthier lifestyles and lower overall health care costs.
Seventy-two employers with 3.7 million people on their payrolls expect the overall cost of providing health insurance to rise by an average 9 percent in 2011, according to the National Business Group on Health, an association of large employers.
To cope with higher costs, 63 percent of the employers say they plan to raise the employee share of premiums, 46 percent will hike out-of-pocket maximums and 44 percent will increase in-network deductibles.
A separate analysis of projected employee costs for health care coverage contains the same bad news: The average employee can expect a 12 percent increase in premiums and higher copays and deductibles next year — and can expect to pay $4,386 in health care expenses — according to Aon Hewitt, a human resources consulting firm in Lincolnshire, Ill.
The rate of increase for total health care coverage costs (employer plus employee contributions) will be the highest since 2005, reaching an average $9,821 per person, Aon Hewitt said.
Large claims on the rise
"We're getting older, sicker, and there are more diagnostic procedures," says Cathy Tripp, a principal at Aon Hewitt. "We're seeing an uptick in large claims — complex cancers with a lot of treatment, heart [problems], back surgery, obesity and diabetes. These drive employers' costs up."
The increase in health care costs has outpaced inflation and wages, which for civilian workers rose a modest 1.5 percent in the 12 months ending in September, according to the Bureau of Labor Statistics.
But that pattern is nothing new. In the decade between 2001 and 2011, total health care costs per employee will have more than doubled from $4,083 to $9,821 at large companies, according to Aon Hewitt, which released its analysis in September. And employees' contributions and out-of-pocket fees will have more than tripled from $1,229 to $4,386.
"This is a story about people paying more and more and receiving less coverage," says Ron Pollack, executive director of Families USA, a consumer health care advocacy group in Washington. During economic bad times, wages fall, "so the differential between premiums and wages gets larger," he points out. "When employers feel besieged by health care costs ... they shift the cost onto the shoulders of their workers."
Nearly 600 large employers told Aon Hewitt that managing rapidly rising health care costs was a top business issue. Besides raising premiums, deductibles and copays, companies said they also planned to impose a surcharge on employees who bring spouses onto their plan if they have access to their own employer-provided coverage.
About 13 percent of 1,200 employers polled already impose a spousal surcharge and the practice appears to be spreading, Tripp adds.
"Companies are saying, if a worker's spouse has access to coverage, why shouldn't he or she go on that plan? Some are as bold as to say, if your spouse has access to other coverage, he or she can't be on our plan. We'll definitely be seeing more of that."
Employers are also becoming more assertive in pushing healthy behavior. Some are charging higher out-of-pocket fees or premiums to workers who smoke or are obese and offering discounts to those who lose weight and lower their cholesterol. Others are asking workers to fill out health-assessment questionnaires in order to identify whether they're at risk for diseases like hypertension and diabetes.
While there's debate over whether it's appropriate for companies to try to manage the personal health habits of employees, one fact is certain. A healthy employee costs less when it comes to medical coverage and productivity.
Companies pushing healthy behavior
"We know from evidence that smoking is linked to cancer; obesity is linked to a variety of diseases including diabetes, cardiac, bone and joint problems. If a company is paying for a percentage of employee health benefits, then they should have a seat at the table and ask how is that employee taking care of his health," says Robert Miller, president of Cooper Research, a health care market research company in Cincinnati.
"You could argue whether employers have a right to do this, but employers are reacting the way they are because they're the ones who wind up paying for it through higher premiums," adds Paul Fronstin, director of the Employee Benefit Research Institute's health research program.
"Companies are desperately trying to control their costs. They're trying to give employees incentives so they can change their behavior" and lessen the risk of disease and the costs associated with it.
At Safeway, the California-based supermarket chain, employees are tested for smoking, weight, blood pressure and cholesterol levels. If they pass all four measures, annual health care insurance premiums are reduced $780 for individuals and $1,560 for families. If they fail any of those measures, they don't get the discounts but can be tested again in 12 months. Employees who show improvement can get money back for paying the higher premiums.
Since Safeway implemented these and other incentives five years ago, CEO Steven Burd has said publicly that the company's health care costs have been flat while most other employers face rising costs. Burd has also launched the Coalition to Advance Healthcare Reform to promote similar health policies nationally.
Newton Medical Center in Newton, Kan., has imposed a "tobacco-user surcharge" of $35 per two-week pay period on employees who smoke or have a spouse or dependent who smokes and is on the health care plan. Employees who falsely state on benefits enrollment forms that they don't smoke face disciplinary action and possible termination, the Wichita Eagle newspaper reported in June.
Cathy Tripp says the moves by employers to impose healthy habits onto employees "is an emerging hot area" as companies continue to find ways to improve their bottom lines.
"For many years, employers have been offering incentives, but now they're saying, you have to do more to get a discount," she says. "There are more demands on employees to take ownership of their health."
Carole Fleck is a senior editor at the AARP Bulletin.
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