Health Costs: A Break For Workers?

Insurance Survey Signals Possible Slowdown In Trend That Shifts Medical Charges To Employees

November 20, 2006
By DIANE LEVICK, Courant Staff Writer

The cost of health insurance in the workplace climbed an average 5.5 percent in Connecticut this year and 6.1 percent nationally, but a welcome slowdown is expected in the longtime trend of shifting more medical charges to workers, a new survey says.

Employers predicted that insurance costs will rise 6.1 percent in Connecticut and nationwide for 2007, according to the annual survey by consulting firm Mercer Health & Benefits LLC.

Nationally, the cost increases have leveled off in the past two years after reaching a 12-year high of 14.7 percent in 2002.

Although employers predict the same level of increase, "we don't [really] know whether it's going to go up or down," said Bruce Prangley, a principal in Mercer's Norwalk office.

Heightened price competition among insurers should help control rate increases, but such factors as rising use of medical services and new and more expensive technology could make the increases larger, Prangley said.

In Connecticut, the average cost of health benefits, including dental insurance, is $7,992 per employee this year - the sixth-highest among the states - compared with the national average of $7,523.

Those costs are usually shared by employer and employee. At employers with 500 or more employees, for example, workers insuring only themselves pay 23 percent of the premiums on average. Workers who insure their families pay an average 31 percent, Prangley said.

The Mercer study said the shifting of costs to employees by means of higher deductibles and co-payments was less of a factor in restraining premium increases this year than in past years.

There was only "modest" growth in 2006 in deductibles, co-pays and the maximum amounts people pay out of pocket for medical services before insurance pays 100 percent, Mercer said.

Shifting medical costs to workers helps keep premiums under control, but the premium savings can be far outweighed by extra money workers must shell out to cover medical bills - especially if they have a serious illness or chronic disease.

Asked about cost-management strategy for the next five years, only 31 percent of employers said shifting costs to employees or shrinking benefits will play an important role in controlling costs, Mercer said.

Prangley said there seems to be less dependence on cost-shifting "and more emphasis on care management - helping people better take care of health issues."

Insurers, for instance, have a growing variety of programs aimed at managing disease and coaching consumers on how to access benefits, deal with medical problems and get fit.

Another strategy growing in popularity among employers is "consumer-directed" health plans, though critics say they are another way of shifting costs - especially to people with higher medical bills. Consumer-directed plans combine spending accounts - often, but not always, funded by employers - with high-deductible insurance. Once workers exhaust the accounts, they must pay medical bills until the insurance kicks in.

The cost per employee for a consumer-directed plan averaged $5,770 nationwide this year, including the employer's contribution, compared with $6,616 for an HMO. The cost increase for the consumer plans averaged only 5.3 percent in 2006, but Prangley cautioned that consumers who choose the plans may have lower-than-average health risk.

The survey's figures reflect self-insured plans as well as regular insurance. Self-insured employers fund their workers' medical claims and pay fees to insurers or other companies simply to administer the plans. Survey results are based on nearly 3,000 employers, including 32 in Connecticut. The mix of Connecticut employers changes from year to year, so pre-2005 comparisons aren't valid.