Surveys: Health insurance costs shifted to workers, even as premiums surge
By N.C. Aizenman,
Premiums for employer-sponsored health insurance continued to escalate this year even as the share of workers getting less generous coverage reached a new high, according to survey data released Tuesday.
In 2011, for the first time, half of workers at small firms with individual policies faced annual deductibles of $1,000 or more. In 2006, that figure was 16 percent. At large firms, the share has grown from 6 percent to 22 percent over the same five years.
At the same time, the survey by the Kaiser Family Foundation found that premiums for family plans rose 9 percent in 2011, after several years of slower annual growth. A similar recent survey by the consulting firm Mercer found that yearly premium increases have been hovering around the 6 percent mark and will grow by slightly less in 2012.
Both sources point to the same fundamental long-term shift: Faced with continually climbing premiums, a record share of employers have moved to plans that require workers to pay more out of pocket.
“Without any real national discussion or debate, there’s a quiet revolution going on in what we call health insurance in this country,” said Drew Altman, president of the Kaiser foundation, which conducted the annual survey of employers in conjunction with the Health Research & Educational Trust. “Health insurance is becoming less and less comprehensive. . . . And we expect that trend to continue.”
Employers seem to be turning to cost-shifting as an alternative to dropping coverage outright. During the first half of the decade, the share of companies offering health insurance shrank from 68 percent to 60 percent, and the figure for very small firms dropped from 58 percent to 48 percent. But since about 2005 that decline has leveled off.
Premiums paid directly by workers have galloped ahead of wage increases and inflation — rising 131 percent between 2001 and 2011 for family plans. Employer costs for those plans have gone up 113 percent over the same period, as some have asked their workers to take on a higher proportion of premium costs.
Still, employers are primarily coping with rising health-care expenses by moving their workers into plans with higher out-of-pocket costs such as deductibles, co-pays and co-insurance.
It’s a process human resources director Teresa Wilmot describes as “agonizing every time you have to do it.”
In 1989, when Wilmot joined Dehen Jackets, a Portland, Ore., manufacturer of cheerleader uniforms and letterman jackets, the company offered its 80 employees complete health insurance coverage. For a monthly payment of about $40 from the worker and $130 from Dehen, the plan covered all expenses except a $10 co-pay for doctor visits.
But every year beginning in the late 1990s, Wilmot said, her insurance broker would present her with a higher premium to keep the same plan. By 2003 it became necessary to shift to a lower-priced version requiring workers to pay a percentage of their health costs up to $1,200. In 2004 Wilmot had to add a $250 deductible. Even so the plan’s monthly premium topped $300.
But that was nothing compared to the premium her broker wanted to charge in 2009: “Are you sitting down?” Wilmot said. “It was $632.”
Faced with increased competition from abroad, the company’s workforce was already shrinking to its current size of 20, she added. “Our people couldn’t afford that premium, and there was no way we as a company could absorb it either.”
So Wilmot shifted to a plan with a drastically higher deductible and out-of-pocket maximum. Today they are $5,000 and $3,000, respectively. To soften the blow, the company has promised to contribute a third of that from its own funds if a worker falls sick. Still, it’s been a hard series of choices for the tightknit, family-owned enterprise.
Beth Umland, Mercer’s director of research for health and benefits, said it’s a common conundrum for employers. “If the benefits are too rich, the cost of them will be high and all employees will be paying more out of their paycheck,” Umland said. With higher deductible plans, “the ones that are using the plan more will be the ones paying more.”
Nonetheless, the burden on workers and their families is becoming widespread.
Peter Cunningham, a researcher at the Center for Studying Health System Change, has found that about one in five families with employer-sponsored insurance was spending more than a tenth of its income on out-of-pocket health-care costs by 2008 (the most recent year for which those statistics were available).
Jerri Wood recently joined their ranks.
Wood, a 59-year-old married mother of three living in Renton, Wash., was diagnosed with a brain tumor in 2002 and had to undergo surgery and intense radiation treatment. As technicians for a telecommunications utility, Wood and her husband were covered by a health plan that paid nearly all the costs: Out of an $80,000 hospital bill, she estimates she paid $500 herself.
But in 2005 the company, which had previously paid workers’ premiums entirely, began requiring them to contribute. For the Woods, that now adds up to about $180 month. The plan has also steadily increased the Woods’ out-of-pocket obligations. Co-pays were introduced for doctors and specialists. Wood must also pay a $150 deductible for diagnostic procedures. On top of that, she faces a 10 percent co-insurance charge.
The result: The twice-annual MRIs Wood must get to monitor a section of the tumor that surgeons could not remove now cost her $1,000 apiece. Combined with other health problems she has had this year, including a throat tumor, Wood estimates her family will ultimately spend more than $6,700 on health care in 2011.
That’s a challenge for a family with two children in college, a third about to start and a pretax income that has dropped to about $60,000 since Wood took early retirement to deal with her health problems.
“We didn’t take a vacation this year. You cut back on gifts. You shop sales and clip coupons. . . . I didn’t get a haircut for 18 months,” Wood said.
“These sort of things sound like vanity,” she added, her voice catching. “But if you don’t look good, you don’t feel good. And a lot of getting well is about attitude. . . . If you’re fighting a chronic illness like this and . . . you’re constantly trying to get the bills paid, well, that’s really hard.”
Polls suggest Wood’s concerns are widely shared by Americans, about half of whom are covered by an employer-sponsored health plan. Nearly 70 percent report being worried about having to pay more for health care or health insurance. Almost a third are “very worried.” And during the debate over the 2010 health-care overhaul, poll respondents consistently ranked health-care costs as the top problem with the nation’s medical care system, well above the problem of the uninsured.
Yet although the new health-care law will vastly expand access to insurance for tens of millions of uninsured Americans, its impact on those already covered through an employer is either narrowly targeted or only likely to pay dividends over the long haul.
Parents can now keep their young adult children on their plans until age 26, for instance — a provision that the Kaiser survey found has caused employers to add 2.3 million people to their rolls. (It’s not known how many would have otherwise gotten insurance through other means.) New plans must also offer preventive services without cost-sharing, with one out of four people with employer-sponsored insurance gaining this benefit in 2011 as a result.
Advocates for the law also maintain that its changes to the way Medicare pays for care could ultimately encourage providers to restructure in ways that substantially slow the growth of private insurance costs as well.
Still, for the moment at least, “there’s not a sense for most people that their costs and benefits will be better under the new legislation if they already have insurance,” said Robert Blendon, a professor at Harvard University who monitors public views on health-care issues.
That feeling, he said, helps explain the stubborn divide in public opinion on the law, which has remained evenly split since its adoption.