2005-09-29 / Business & Finance

Employers To Shift Rising Health Care Costs To Workers

By Anne D’Innocenizo

AP Business Writer

NEW YORK (AP) — The nation’s employers are struggling with close to double-digit increases in health care costs in 2006, and consequently will be shifting more of that burden to their employees, according to a new survey of more than 1,800 firms.

The preliminary survey, released Tuesday by Mercer Human Resource Consulting, found that employers an-ticipate an almost 10 percent increase in health care costs next year, about three times the rate of general inflation, if they leave benefits unchanged.

But companies that were polled in the survey – both those that purchase insurance and firms that are self-insured – are only earmarking an average increase of 6.4 percent in their spending. That will mark the third conse-cutive year that employers are seeing their actual health care costs slow as they pass on more of the costs to their workers.

“Employees are bearing more of the costs because double-digit increases are unsustainable,’’ said Blaine Bos, a Minneapolis-based health care consul-tant for Mercer.

To keep a lid on costs, Bos said many employers are using a tactic called cost shifting, which demands employees to pay higher deductibles, premiums and co-payment fees. Employers are also limiting workers’ choice of insurance plans.

“We used to think of cost-shifting as something you could do only every so often,’’ said Bos.

“But we’re seeing a new willingness on the part of employers — born of desperation — to shift cost in successive years to achieve acceptable cost increases.’’

He added, “At the same time, we’re helping many employers with longer-term initiatives such as health management and consumerism, with encouraging results.’’

Mercer said that employers had forecast a 10 percent increase in health care costs in 2005 — if they left benefits unchanged, but that figure should be closer to 7 percent, as employees bear more of the costs.

For 2004, employers had forecast a 12.9 percent increase in health care costs, but actually ended up paying a 7.5 percent increase because of cost-shifting.

Smaller employers – which are much more likely to use insured, rather than self-funded health plans — will probably enjoy smaller cost increases in 2006 compared with employers of 500 or more people, according to Mercer. But the difference in costs will not be as dramatic as in recent years, Mercer said.

Large employers predict an average actual increase of 6.8 percent for 2006, compared with a 5.8 percent gain among small employers.

Two-thirds of the large employers surveyed said that they would shift cost to employees, which include increasing the percentage of premiums paid by the employee, as well as raising deductibles, co-payments, coinsurance or out-of-pocket maximums.

With costs rising more slowly for small employers, a smaller percentage – 35 percent – said they would shift costs to employees in 2006.

“Small employers also have less flexibility to tinker with plan design,’’ Bos said. “They’re most likely to shop around for a cheaper plan.’’

The Mercer survey collected data over the Internet and phone, with the bulk of responses coming in August and September.

Mercer expects to compile the final results from about 3,000 companies by the end of the year, according to Beth Umland, director of health and benefits research at Mercer.

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