Health insurance: Here comes the gouge
Fellow wage slaves: Next month, we’ll once again have a chance to decide how we’d like our pay cut, as annual open enrollment for employee health coverage arrives.
Here’s what to expect: Higher employee premiums — 4 percent hikes will be typical — but that’s just part of the gouge. Expect higher deductibles and coinsurance, and some of us will see new limits on our choice of doctors and hospitals.
A premium increase is, in effect, a pay cut since it comes directly from the employee’s paycheck. Workers can often soften the blow by selecting a cheaper plan with lower coverage — but they’ll regret it if they get very sick.
There is a continuing push toward high-deductible plans and “wellness programs.” The latter use rewards — and sometimes punishment — to get employees to take better care of themselves.
Some companies, especially smaller ones, are dumping spouses from employee health coverage.
Now let’s see the details:
Nationally, employers are seeing the cost of their current plans rise by about 6 percent, according to a survey by Mercer, the employee benefits firm. St. Louis is in line with the national figure, Mercer says.
That 6 percent is actually the smallest increase since Mercer began tracking costs in 2005. Costs rose 10 percent that year.
In the St. Louis area, small to midsized employers are finding increases in the 5 percent to 9 percent range, although some unlucky small firms are being hit with hikes of up to 20 percent, according to local insurance brokers.
Employers won’t swallow all of that. As in previous years, they’ll pass much of it along to workers, spreading the pain through a combination of higher premiums and coverage cuts. Mercer reports premium hikes averaging about 4 percent nationwide.
That’s about the same as last year, but it’s double the percentage that wages rose.
It’s part of a great health insurance cost shift that has been going on for more than a decade. Employer health insurance premiums have risen 61 percent over the past 10 years, but the worker’s share has risen 83 percent, according to the Kaiser Family Foundation. Meanwhile, the average deductible has more than tripled, to $1,077 nationally, since 2006.
“The pain level is significant, and it affects family budgets because wages are not rising,” said Drew Altman, Kaiser’s CEO. “What we used to think of as a high-deductible has become commonplace.”
The Affordable Care Act, which took major effect in 2014, places some restraint on premium increases — an employee’s premium costs can’t exceed 9.5 percent of the worker’s income. That creates pressure to raise deductibles instead of premiums at some companies with lower-paid workers.
A small comfort: Companies generally aren’t pushing up copays for doctor visits, says Chris Johnson, manager of consulting services at J.W. Terrill in Chesterfield. It’s still typical to pay $25 for a primary care visit and $50 to see a specialist around St. Louis.
GROWING DEDUCTIBLES
Deductibles are what the patient must pay before insurance kicks in (although routine checkups and screenings are free). Coinsurance is the percentage of a bill the patient must pay even after the deductible is met.St. Louis seems to fare worse on deductibles than the rest of the nation, but better on copays, says Johnson. Nationally, coinsurance averages about 20 percent of the bill, compared to 10 percent for in-network here. But the typical deductible here is about $2,000 for an individual, nearly double the national average. Some companies mitigate that bite by paying part of the deductible, he says.Smokers and the chubby, beware. Eight out of 10 big companies now use some form of “behavioral pricing,” which usually means charging more to smokers.
Kaiser finds that 56 percent of big firms are using some form of health screening, and 38 percent provide a financial incentive to get healthy.
For instance, a company might charge higher premiums for obese people, but waive that for those who take a weight-reduction program.
Companies are continuing to push high-deductible plans — sometimes making them the only choice. These have lower premiums for both company and worker, which is why employers like them. But they can stick patients with giant medical bills if they get seriously sick.
Such plans have deductibles of $1,300 for self-only coverage and $2,600 for families. The “out-of-pocket maximum” — the most you can be charged for care each year after the deductible — is $6,550 for self-only coverage and $13,100 for family coverage.
Some firms are easing the bite by contributing to the tax-free health savings account that accompanies high-deductible plans.
“The fear people have with high-deductible plans is what happens in a catastrophic event – a car accident where you end up in a coma,” said Alan Loretta, health and benefits leader in Mercer’s St. Louis office. So, some employers sweeten the deal with “hospital indemnity” and “critical illness” coverage. Such policies pay a set amount if a person gets certain illnesses, or for every day in the hospital.
NARROWING NETWORKSOther companies are narrowing the choice of hospitals and doctors to save money.“It’s not a mass exodus, but there’s a fairly steady stream toward narrower networks,” said Johnson.
In the St. Louis area, that often means excluding BJC HealthCare, the biggest hospital and doctor group. That can cut coverage costs by 6 percent to 7 percent, says Johnson.
Boeing this year is offering employees an option that includes only the Mercy Health Alliance, built around the Mercy hospital group. Employees would pay $1,080 less a year on family coverage premiums compared to Boeing’s standard coverage. But takers will pay higher charges if they go outside the Mercy network except in emergencies.
It’s part of an experiment with “accountable care organizations.” It’s a structure that lets medical providers make more profit if they keep costs down and quality up, rather than simply billing for each procedure.
Smart employers choose providers on quality, as well as price, since bad treatment raises costs the employer more in the long run, says Loretta.
More employers are trying to move toward a “defined contribution” approach to benefits, said J.J. Flotken of Caravus benefits consultants in St. Louis. The company offers a set amount of money, and the employee can spend it on a smorgasbord of benefits, including health coverage.
The extra choice can disguise the fact that the employer is paying a smaller share of the cost.
ENDING BENEFITS
Under the health law, employers with fewer than 50 workers can drop health coverage without paying a penalty to the government.“That’s a conversation that happens with almost every employer under 50. For now, they’re keeping the plans, but the writing is on the wall,” said Bill Hill, president of Visor Benefits, counsels small employers.Employers with more than 50 workers pay a $2,000 per-worker tax penalty if they don’t offer coverage to employees working 30 hours or more per week.
That led to speculation that employers would cut hours. But the Kaiser Family Foundation found “no big shift” toward fewer hours in its employer survey this year.
Hill knows one fast-food operator who decided it would be cheaper to pay the penalty than insure his full-time managers, while he’s keeping his other employees under the 30-hour limit.
Under the Affordable Care Act, employers who offer health insurance must offer coverage for children but not spouses. So, some employers are dropping spouses, said Hill.
“That sounds bad,” he says, but spouses from low- and moderate-income families can qualify for federally subsidized coverage on the Obamacare insurance exchanges.
There are lots of reasons for rising health care costs — starting with the country’s aging population. But fingers are pointing at the drug companies for putting hefty prices on new drugs — and jacking up the price of a few older ones as well.
For instance, generic cholesterol medicine will cost $4 a month. But new treatment for people who can’t tolerate the generics can run $7,000 to $20,000 per year.
That’s driving some companies to “four-tier copays.” A typical plan might have cheap copays for generics, higher for brand names, even higher for brand name drugs with generic equivalents, and the highest copays for very expensive drugs.
CHANGING RULES
The Affordable Care Act changed the rules on what must be covered, and brought in a large number of previously uninsured people into the insurance pool. That left insurance companies guessing as to how much to charge. So, the law included temporary subsidies for insurers facing high claims. Now those subsidies are phasing out, putting upward pressure on premiums.Some employers with 50 to 100 workers also are dealing with a change to be rolled in next year under the Affordable Care Act. Until now, their premiums were set considering the health experience of their employees. Starting next year, they’ll be “community rated” — their rates will by the experience of everybody in a broad insurance pool.That’s good news for employers with older, sicker workers. They’ll get lower rates. But it’s bad for a company with young, healthy ones.
Companies that renewed their annual coverage by Oct. 1 could generally get another year under the old rules.
Companies are also getting ready for the “Cadillac tax,” set to start in 2018 for health coverage that costs more than $10,200 per individual and $27,500 for families. Mercer estimates that 31 percent of companies may have to pay — unless they cut the cost of coverage.
Some may decide to ditch “flexible spending accounts,” which let employees put aside untaxed money to pay deductibles and copays. They’ll also push more employees toward high-deductible plans.
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