If you’re one of the 150 million Americans who get health insurance through your job, prepare to pay more. The new year will likely bring higher deductibles and co-payments, penalties for not joining wellness programs and smaller employer contributions toward family coverage.
While some workers and employers blame the federal health law for those changes, benefit experts say the law is mainly accelerating trends that predate it.
“Employers are experimenting” with ways to control costs, said Paul Fronstin, at the Employee Benefit Research Institute, a nonpartisan think tank in Washington.
The bottom line is you will have to dig deeper into your own pocket.
After two years of slower-than-usual growth in health spending, employers are bracing for a spike in 2014. That’s partly because they expect more workers to enroll due to the law, which requires most Americans to carry coverage or pay a fine.
Analysts say the health law is fueling some of the changes, among them, the increased emphasis on wellness programs since the law allows employers to offer larger incentives — or penalties — for participation in wellness programs, up from 20 percent of the cost of coverage to 30 percent.
In addition, employers can now compare their own offerings with the policies sold through the health law’s websites, some of which come with higher deductibles and cost-sharing.
Many people enrolled in HMO or PPO plans through their employers, for example, haveplans that cover at least 80 percent of expected medical costs as calculated for a group of typical policyholders. But the bronze plans — the lowest level of coverage among the four tiers of plans sold through the health law marketplaces — cover about 60 percent of expected costs, with consumers paying the rest, while silver plans cover 70 percent of expected costs.
Some employers are already asking their insurers to create similar policies for their workers, said Dan Mendelson of Avalere Health, a Washington D.C. health care consulting firm.
“The employee is being asked to spend more and more,” said Mendelson. “Absolutely, it’s becoming more acceptable.”
Cost Shift To Workers
One of the most well-known effects of the health law on employers – the requirement that they offer coverage to full time workers or pay a fine – has been delayed until 2015.
Most aren’t expected to drop such benefits because they are seen as an important tool to recruit the most desirable workers, particularly for larger employers. While about 6 percent of large firms said they might drop coverage in the next five years, the percentage of small employers who said they are likely to do so rose from 22 percent to 31 percent, according to a survey released last month by consultant Mercer.
Still, employers are looking to reduce their exposure to rising costs, often by shifting more of the burden onto workers.
About 18 percent of large employers say they will increase worker’s payments toward family coverage next year, and 10 percent expect to do so for individual coverage, according to Mercer. Forty-seven percent of employers have increased workers’ deductibles or copayments in the past year, and 43 percent expect to do so in the next few years, according to another survey by benefit firm Aon Hewitt. That same survey showed that workers’ average out-of-pocket costs, which include copayments and deductibles, increased nearly 13 percent in 2013, to $2,239. The benefit firm predicts that the average will rise again, to $2,470 next year.
Partly that’s because of the rising use of so-called “consumer-driven” or high-deductible plans. Such policies require consumers to pay a significant amount of their health care costs – at least $1,250 for an individual – before their insurance kicks in. They include savings accounts, where the worker can put tax-sheltered wages to cover medical costs. Some employers also contribute to those accounts. The median deductible nationally for such plans is $2,500 per individual, according to Mercer.
About 66 percent of firms surveyed by Towers Watson offer such plans to workers, and enrollment in them is now about equal that of HMOs.
Employers like them because they cost about 20 percent less than an HMO and about 17 percent less than the most popular type of coverage, the preferred provider network or PPO.
“They will be an important option for employers looking for a low-cost plan to make extending coverage to additional employees more affordable,” the Mercer study said.
And for a growing number of workers, such plans may be the only option they get.
General Electric and media firm Gannett, parent of USA TODAY, are among about 10 percent of companies offering such plans exclusively. About 44 percent of companies told Aon Hewitt that they are considering dropping all but that type of coverage in the next three to five years.
‘Skin in the Game’ For Consumers
Raising deductibles and other cost-sharing gives employees “skin in the game,” some analysts say, getting them to pay more attention to their health and be more judicious in deciding when to see a doctor.
“That’s not driven by the ACA, but the cost pressures on employers,” said Craig Rosenberg, Aon’s health and welfare benefits practice leader. “… If companies can help workers get more involved in their health, the theory is there are savings that benefit everyone.”
Others caution that “high deductibles have good and bad with them,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation, a nonprofit research organization. (KHN is an editorially independent program of the foundation.) “They do discourage use and lower spending, but, unfortunately, some of the things people are discouraged from are things people need.”
Many workers next year will also shop for coverage through “private exchanges,” run by benefit firms like Aon. While not part of the health law – and not subsidized by the federal government — private exchanges are being used by employers such as Walgreens and Sears.
Employers often give workers a flat dollar amount toward the cost of such coverage. While workers get to choose from various plans, those who choose higher priced coverage will pay more out of their own pockets. Employers hope the exchanges will foster competition among insurers that will hold down costs. Over time, employers could also opt not to increase the sum they pay toward coverage.
A recent survey of large employers by the National Business Group on Health found that about 30 percent of employers are considering sending active employees to such an exchange although the money-saving potential is largely untested.
“The hope is that it controls costs through competition at the employee level,” said Fronstin, who said the private exchanges really mimic what the federal government has long done with its workers in the Federal Employee Health Benefit Program.
“Employers, other than the federal government, have never really tried this on any grand scale,” he said.