Health care cost burden shifts toward consumers, away from employers

There’s a major shift underway in how health insurance costs will be covered as corporations are transferring more of the burden toward employees. Higher deductibles, spousal surcharges and reduced availability for retirees have become the new reality for millions of Americans since The Affordable Health Care Act – aka, ObamaCare – become law.

The annual survey of Towers and the National Business Group found that 80% of the 1,000 employers surveyed in 2012 said they will continue to raise the share employees pay for their health care over the next three years. A recent report by the Kaiser Family Foundation states the cost of medical care per-person in the U.S. $13,700.

The average cost for health insurance benefits was $2.36 per hour worked in private industry according the March report from the federal Bureau of Labor Statistics. That represents 7.9% of total compensation. In March 2004, employer costs for health benefits averaged $1.53, or 6.6% of total compensation.

Employee share of premiums increased 8.7% between 2012 and 2013 with the dollar burden rising from $2,658 to $2,888, according to the Towers survey. Employees contribute 42% more for health care than they did five years ago and out-of-pocket costs are up 15% over the past two years. Meanwhile, annual incomes rose just 1.6% over the past three years, according to the Towers report.

In addition to funding less for employees, corporations are also implementing surcharges for spousal coverage averaging $100 per month. About one-third of the companies surveyed by Towers already do this. Employer subsidies for retiree medical coverage have declined with just 15% of those surveyed still covering it.

Jennifer Parks, owner and broker of Fort Smith-based HealthPointe Insurance Services, said the small groups she represents have seen between a 7% and 15% premium increase for 2015, with the average being 8%. She said this is lower than the standard 12% increases employers faced each year over the past decade, which many times were not fully passed on their employees.

“Some folks are experiencing sticker shock this year, especially those coming from employer-sponsored group plans into individual plans. I gave a quote to a lady last week who said to that the price was anything but affordable, like the law claims,” Parks said.

Higher prices also are hitting public sector workers around the nation – especially teachers.

“Our teacher insurance doubled for the same type of coverage we had last year,” said Kathy Whitfill, a teacher in east Texas. “It will cost us $1,000 a month for a family of three to be covered this year.”

Parks said teachers in Arkansas have experienced similar shock, in part because that demographic has proven to be frequent users on a national scale. 

An Arkansas-based media company recently told its 2,600 employees they would have the choice of two plans. The self-insured group offers a basic plan with 3,000 annual deductible and a premium option with 1,000 deductible, prescription benefit and doctor copay. The cost increase for the premium plan rose more than 200% for this coming year. The standard plan rose modestly. 

Parks said employers are asking their employees to make a choice: pay more if you want all the benefits or pay less if you don’t. She said those who are frequent users of prescription cards and doctor copays should pay more for that benefit. Under the previous system, Parks said frequent users hiked up the costs for everyone in the group. This new model is a more practical solution.

HIGHER DEDUCTIBLES
Parks said companies and individuals have moved toward higher deductibles for the past few years to keep monthly premiums affordable. But this has raised concern among health providers and consumers.

Don Gibson, CEO of Legacy National Bank in Springdale, said higher health care costs are ever present on the minds of small business owners he speaks to regularly. He said many of them are shifting more of the cost burden toward the employees who are choosing high deductibles.

“I expect to see more consumer bankruptcies as an indirect result of higher health care costs in the future,” Gibson said.

Kaiser found that higher deductibles are more popular than ever. Employers like higher deductibles because it requires employees to be careful about how they spend their heath care dollars. 

Mike McCurry, chief operating officer of Mercy Health, said during a June meeting in Rogers that more large employers such as FedEx Corp., Home Depot and Walgreens as are making radical changes to their plans, eliminating health care options for retirees and non-spouses and raising the minimum deductibles to keep costs down.

“The biggest growth area impacting Mercy’s charity care fund are insured people who can’t afford the deductible. We are seeing $5,000 deductibles and higher among people who need to have a procedure but are not able to cover that on the front-end. Mercy has had to help patients set up payment plans to payout the deductible after the procedure has been performed,” McCurry said.

The other dynamic at play is that insured individuals are being advised to have tests and procedures but do not have them because they can’t meet the deductible.

“This is of great concern, because it will likely come back to haunt everyone,” McCurry said. “Patients are also shopping services like never before, looking for lower cost alternatives. As Mercy moves more of the diagnostic testing and procedures out of its primary care clinics the cost for customers will go down.”

He estimates that will sting Mercy’s annual budget by $30 million a year. McCurry said Mercy’s systemwide budget is operating on $120 million less revenue coming into this year as a result of the Affordable Care Act and the reduced payments. The cost of treating the uninsured is expected to be $17 million this year for Mercy Health, he said.

INNOVATIVE SOLUTIONS
Companies across the country are finding unique new ways to help reduce their own costs and assist their employees with added cost burdens.

Wal-Mart Stores plans to open 12 in-store clinics this year, bringing lower cost heath care to its employees and shoppers in select markets. Rogers is one of those test markets. Why the clinics? The retailer is facing $500 million in added health care costs this year as a result of the Affordable Health Care Act.

Former Walmart U.S. CEO Bill Simon has explained that when a Walmart worker visited a doctor they paid a $20 copay and the company wrote a check for $120. He said the in-store clinics will allow Wal-Mart to better control those costs and reduce copays to $4 for its insured workers and dependents, and $40 for customers. The first clinics opened in Texas earlier this summer and are doing well, according to Wal-Mart.

Siloam-Springs-based Simmons Foods has used a similar system for several years and said it has brought down the cost of its insurance overall.

WEHCO Media, the parent company of the Arkansas Democrat-Gazette, recently told its employees that its own credit union would be available to make loans to those who need help with their deductible ahead of medical procedures. WEHCO officials did not return The City Wire’s request for further comment about this service.

COST UNCERTAINTY
Parks said there are some opened-ended costs associated with the new law which have insurance companies scrambling to try and gather enough premiums for possible exposures. She said under the new law the basic plan offers an annual routine exam, one mammogram a year and a colonoscopy every decade, as well as an annual eye exam with no out-of-pocket costs to the insured. She said older plans sometimes capped these wellness benefits, but there is now no cap.

No limit policies and the “habilitative” care requirements create uncertainties on the part of insurance companies, she said. Habilitative care, Parks explained, is treatment, medicines and therapies never before covered. For instance habilitative treatment could help someone born blind get their sight, or provide therapy for a person born lame to learn to walk. Because such treatments have never been covered it is difficult to gauge what the cost will be, Parks said.