It’s that dreaded time of year again. Employees are beginning to find out how much more they’ll be ponying up for health insurance in 2011, and (surprise, surprise) costs are going up, again.
The increase is typical of what workers have seen in last three years — around 10 percent. But what’s different this year is some employers aren’t just blaming the usual suspects for rising premiums — unhealthy workers, over-paid doctors and hospitals, and a bad economy. Now insurance experts and employers are also blaming health care reform.
During this open enrollment season it’s open season on the much maligned “Affordable Care Act,” aka “ObamaCare,” even though it won’t be in full effect until 2014. Boeing, Verizon and Caterpillar are just a few of the companies that have pointed a finger, in part, at the law.
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“It is a period of uncertainty with so much additional unknown about the reform. During such a period, the risk of the new regulation tilts the balance into more cautionary behavior,” and that means higher premiums, said Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University.
And, she added, some business interests who were not happy with health care reform “want to make sure ObamaCare looks like the worst thing that’s ever happened.”
Insurance industry experts argue it’s not about bashing health care form. They point to a host of provisions under the new law that begin as of 2011 — including extending dependent coverage to 26-year-olds and the elimination of lifetime caps on medical care. These provisions are driving some of the cost increases for next year, they argue.
“I would attribute at least 2.5 percent to 5 percent of the increase directly to the bill,” said David Goldfarb, founder and principal of DSG Benefits Group, an employee benefits brokerage and consulting firm. Additional health reform measures starting next year that are driving the project increase, he added, include the elimination of pre-existing condition exclusions for children under age 19 and additional administrative costs associated with reform.
Nancy Metcalf, senior program editor for Consumer Reports Health, said it’s unfair to measure the impact of the Act at this point because it’s too early to tell how health care reform will affect overall costs. “It depends on the characteristics of a workforce and how terrible the coverage was in the first place,” she noted.
When you improve coverage, added Cheryl Fish-Parcham with Families USA, it does cost more.
“We shouldn’t be blaming health reform but the cost of health care that’s been rising,” she continued. “As health reform gets costs under control, costs will stop rising.”
No matter the real culprit, the bottom line is employees will be handing over more of their paychecks next year for health care coverage.
According to an analysis by HR consulting giant Aon Hewitt:
- The average premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010.
- The employee share will be $2,209, or 22.5 percent of the total health care premium. This is up 12.4 percent from 2010, when employees contributed $1,966, or 21.8 percent of the total health care premium.
- Average employee out-of-pocket costs — such as copayments, coinsurance and deductibles — are expected to be $2,177 in 2011. That’s a 12.5 percent increase from $1,934 in 2010.
In the past decade, the worker’s share of medical costs, including premiums and out of pocket costs, has more than tripled to $4,386 (projected for next year) compared with $1,229 in 2001, according to Aon Hewitt.
Small firms are also seeing health care costs rise, said Donald Mazzella, COO of Information Strategies Inc. Nearly 50 percent of small firms surveyed by the company expect premiums to rise and 61 percent expect to ask workers to pay more for their coverage. Another 41 percent said they will drop coverage when full implementation of healthcare reform hits.
Tom Lerche, Aon Hewitt’s health care practice leader, said the majority of projected increases in health care costs nationally can be attributed to “the aging population and increasing prevalence of chronic diseases.”
Employers will be looking to do more cost sharing with employees, he added, including having employees pay more for prescription drugs. On the flip side, he said, expect more wellness programs that encourage workers to get healthier and financial incentives for those who do things like take health assessments.
While most insurance experts don’t expect the size of physician and hospital networks offered to employees as part of preferred provider networks to change, look for the growing use of sub networks, said DSG’s Goldfarb. For example, he explained, you may only have to pay $20 to see a doctor in one of these sub networks, as opposed to paying $50 for a visit to a doctor who’s in your plan’s general network.
To make the most of this open enrollment season, and to make sure you don’t end up paying more than you should, consumer advocates suggest workers do more than just reenroll for the same plan they had last year without reading all the fine print. There may be a less expensive option.
For example, Wendy Nice Barns, vice president of HR and a consumer health insurance expert from eHealthInsurance.com, said employees could mix and match plans.
“Depending on health conditions, it can be less expensive for certain family members to be on a separate plan than the employer-sponsored plan,” she said.
And watch those pesky out-of-pocket costs.
“If you visit the doctor frequently, these can add up. If you don’t visit the doctor but a few times a year, it may save you to look for a plan with a higher co-pay and lower premium,” she advised.
You may also want to consider a high-deductible plan, either an employer-funded Health Reimbursement Arrangement (or HRA), or a Health Savings Account (or HSA) funded by an employer and employee, or both. But note that, according to Consumer Reports, these types of plans “generally work better for healthy people who expect their medical expenses to be low.”
The big question, of course, is will costs ever come down?
There’s no evidence to suggest they will, said Helen Darling, the president the National Business Group on Health, a non-profit association of large employers. She said we can try to drive them down, but “we can’t force them to.”
While she estimates the health care reform law is probably only adding about 1 percentage point to the expected health insurance increases for next year, in the end the biggest problem may be in the mirror.
“We should blame ourselves and change our behavior,” she said, referring to employees, employers, insurers and health care providers.