In terms of payroll, employers now pay 9% towards health benefits, compared to 7.28% in 2000, according to the report on over 1,000 US companies. Effects of this rise are often the switching of costs to employees, as well as increased bargaining with insurance companies.
The report indicates one cause is that reimbursement rates to hospitals and physicians are on the rise, while another is the cost of improving medical technology. With longer lives, stated the report, comes a longer period of medical care. Annual prescription drug cost increases of up to 15% have also contributed to the rise in health care premiums. Also to blame: the aging of the workforce and the deteriorating health of the country as a whole.
One of the most common effects of this recent price rise has been the increased use of co-payments at doctors’ offices, according to the study. Most plans have a $15 or more co-pay in 2005; in 2002, the average was half of this total.
Other changes include:
- Prescription drug plan changes. Employers have been raising plan co-payments, as they have for other medical services. In addition, they have also used more incentives to utilize generic drugs, revised the employee dollar co-payments to percentage coinsurance and required mail order usage for maintenance drugs.
- Retiree medical benefits. For companies providing retiree medical coverage to those over 65, the 2006 Medicare drug benefit may induce some employers to opt for Medicare Part D benefits. Many companies are currently studying this to see if it makes fiscal sense for their business.
- Wellness and disease management. Some companies provide wellness programs that aim to improve employee health. However, the Hay report predicted that these programs will become more prevalent so companies can save on medical costs before ever incurring them.
- Health Savings Accounts (HSAs). Currently, less than 10% of companies report offering an HSA as an option to employees and typical participation rates are around 10%, according to the report.
- Employee consumerism. This involves communicating to employees how medical cost increases affect them.
According to the report, HMO and Point-of-Service (POS) plans have been declining in prevalence as the primary plan offered by employers. In 2000, almost half of companies had HMO or POS plans as their primary plan; only 33% offered such plans in 2005.
Looking ahead, Hay predicted that more cost-shifting
will occur, with employees taking on even more of the
burden of health costs.
Hay Group ( www.haygroup.com ), which conducted the report, is a global organizational and human resources consulting firm.