Poll: Employers Pass Along Higher Health Costs

October 16, 2003 (PLANSPONSOR.com) - With health-care cost inflation running at 14.3% annually, nearly half of the respondents in a recent poll said they're changing their health plan design to cope with the higher costs.

Nearly half (45%) of the respondents to the survey by the Human Capital practice of Deloitte said they are increasing deductibles, co-payments, and insurance to pass along a portion of the extra coverage costs. Not surprisingly, one in five employers are trying to make their employees better health consumers as their cost-control strategy – up from 9% in a 2001 survey.

“Clearly, this indicates a major shift by employers to get employees more involved in the health-care process,” said Barbara Gniewek, a principal in Deloitte’s Human Capital practice and the survey’s chief analyst. Two-thirds of employers that have already implemented a consumer-driven plan offer it as an option to their traditional plan lineup

Another 20% of employers reported increasing employee contributions as a primary means to control costs, while 9% said their primary strategy was contracting with lower-cost health plans or administrators through the competitive bid process.

Meanwhile, only 1% of respondents indicate that they’ve implemented a voucher plan, such as a lump-sum cash payment to employees instead of health insurance. However, 11% are thinking about doing so during the next five years.

Additional survey findings include:

  • 85% of respondents said cost was the primary factor driving their health-care strategies. The cost of employer-sponsored health-care benefits increased 14.3% this year to $6,020 per employee from $5,239 in 2002.
  • Prescription drug costs averaged $847 per employee annually in 2002, or 16% of total medical plan expenses.
  • 68% of respondents indicate that the most significant obstacle to changing the current health care model remains employee resistance.
  • Four in 10 feel that managed care is effective in controlling costs and satisfying employee need. while 57% say that Preferred Provider Organization plans offer the most effective approach for employers in managing cost and maintaining quality of care.
  • 72% of respondents indicate that they continue to use printed materials in their open enrollment forms. However, employers are increasingly utilizing Web-based options for health-care communication.

In response to controlling prescription drug benefits costs in the future, 45% said they would increase the level of employee cost-sharing, 21% will change from co-payments to coinsurance, 16% will implement a separate prescription drug deductible, and 6% will implement an annual maximum benefit. Some 12% indicated that they would move from a two-tier to a three-tier/formula benefit. Only 4% indicated that they would drop health-plan coverage for prescription drugs.