As insurance premiums rise, employees pay a bigger share

Patients are less likely to receive the medical attention they need when they must pay more for coverage.

By Emily Berry — Posted Oct. 11, 2010

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Workers are expected to pay more for health care coverage in 2011 than in 2010 as part of the steepening rise in premiums and employees' share of the cost. Experts say that increase could keep workers from getting the care they need.

The average cost of group health insurance coverage is expected to rise 8.8% from 2010 to 2011, the highest increase since 2005, when premiums rose by about 9.2%, according to research by Hewitt Associates, a human resource consulting firm in Lincolnshire, Ill.

Workers are bearing a bigger portion of that cost than a few years ago.

Hewitt projected that the average annual health care premium will rise from $4,083 in 2001 to $9,821 in 2011. In that period, employees' annual insurance premium contributions and out-of-pocket costs will more than triple, from $1,229 to $4,386. The employees' percentage of costs has risen from 35% in 2001 to an expected 45% in 2011.

Hewitt's data, released Sept. 27, are based on polling of 350 large U.S. employers, which represent 14.4 million people.

Doctors affected, too

The rising cost burden for employees is not good news for those workers' physicians.

When employees have to pay more for coverage and care, they are less likely to get the medical attention they need, said Ron Pollack, executive director of Families USA, a health consumer advocacy group bashed in Washington, D.C.

"When people have difficulty paying, the most likely impulse is to defer care," he said. "In some instances, a health problem gets worse or a disease spreads, so it can have really negative effects."

Insurers have noticed that patients put off care as their payment share goes up. In their second-quarter earnings in 2010, many of the seven largest publicly traded insurers noted that their medical costs were lower than expected in part because their members weren't visiting their doctors.

Meanwhile, analysts said, physicians can expect to put more effort into collecting from those patients who show.

Employers pass along a larger portion of the cost of health coverage when they can't make enough benefit changes to offset premium increases, said Bob Tate, chief health care actuary for Hewitt.

There is no sign of these trends abating between now and 2014, when major provisions of the Patient Protection and Affordable Care Act take effect, Tate said.

Work force older, sicker

One reason for increased costs is an aging work force. When companies hire new workers, they tend to be younger, healthier and less expensive than current or former workers, Tate said. The poor economy slowed hiring, so the average age of workers increased and so did cost.

Tate said he believes that will ease as the economy improves and companies begin hiring again.

"In 2014, when the [health insurance] exchanges are available and 30 million people are now covered that weren't before ... that will probably relieve some of that extra trend pressure, and in the absence of other things happening, will get us back to where we were before or a tiny bit lower," he said. "All of that said, there's a lot that could happen between now and 2014."

Hewitt looked at the ways in which employers have reacted to rising health insurance premiums besides shifting costs to employees. Many ranked disease management and wellness programs as top priorities. Rather than simply offering those as options, many employers planned to or already were penalizing employees who do not participate.

Others said they will audit their rolls to check the eligibility of covered dependents, or start charging more to cover employees' spouses.

Hewitt also reported that employers are getting tougher on insurance companies and other health program vendors that don't deliver "measurable, near-term results," and said they are using the same vendors for multiple programs to take advantage of discounts.

Hewitt's survey was the second released in September that showed an increase in employees' share of health costs. Early in the month, the Kaiser Family Foundation reported that employers' premium costs increased 3% in 2010 but that their employees' costs went up 14%. The survey of about 3,000 employers, as well as Hewitt, noted that employers were passing more premium costs to workers.

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Higher premiums, higher costs

View in PDF

Click to see data in PDF.

Next year is likely to bring escalating health insurance premiums along with greater cost-sharing requirements on employees, according to an analysis by Hewitt Associates. Figures are national averages.

Year Annual cost per employee Employee contribution Employee out-of-pocket cost Total employee cost Employee percentage of cost
2004 $6,059 $1,068 $1,051 $2,119 35.0%
2005 $6,616 $1,201 $1,234 $2,435 36.8%
2006 $7,140 $1,357 $1,373 $2,730 38.2%
2007 $7,516 $1,558 $1,484 $3,042 40.1%
2008 $7,970 $1,711 $1,633 $3,344 41.8%
2009 $8,449 $1,827 $1,733 $3,560 42.1%
2010 $9,028 $1,966 $1,934 $3,900 43.2%
2011* $9,821 $2,209 $2,177 $4,386 44.7%

Note: * 2011 figures are projected.

Source: Hewitt Associates

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