Employers Keep Shifting Health Costs

Affordability is a big concern among employers.

Employers are worried about rising health care costs for their workers, but that isn’t preventing them from shifting more costs to employees.

A worker’s share of the cost of a family policy jumped an average of 14% this year (opens in new tab), and is on track to climb by a similar amount next year. Since 2005, health insurance premiums are up by 27 percent, but workers have seen a 47% jump in their share of the costs. Meanwhile, wages are up just 18%.

Steps companies are taking:

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Offering only health savings accounts. These consumer-directed plans combine a tax-favored savings account with high-deductible insurance. To ease the transition, some firms will make two versions available. One will come with lower deductibles and out-of-pocket costs, but higher employer and worker contributions. The other will feature higher out-of-pocket costs and deductibles, little or no company kick-in and lower premiums.

Cutting lower paid workers a break. More employers will require highly compensated staff to pay larger premiums or more out-of-pocket expenses than lower-paid colleagues. Called salary banding, the idea is to help workers at the lower end of the pay scale afford health insurance, says Leah Malof of Buck Consultants.

Encouraging the use of the most cost-effective providers. For example, dropping copays to 10% for those who go to top-tier doctors and hospitals, and raising them to 30% for those who go to providers in a middle tier, and to 40% to 50% for patients who go out of network. Patients who agree to go to centers of excellence for care in other parts of the country would get 100% coverage and all travel expenses paid for them and a companion.

Requiring spouses and other dependents to pay more, especially if they can get coverage elsewhere. Some employers will drop coverage for spouses. In some cases, workers will pay per child rather than a flat family rate.

Upping the ante for unhealthy behaviors. Richer benefit packages or lower premiums will go to workers who not only participate in wellness programs but succeed at them. Employers will require results such as lowering blood pressure or losing weight. Those who can’t reach a health goal for medical reasons must be provided with an alternative standard. “Employers have been asking workers to do this for a long time. Now if they don’t do it, they will pay more,” says Cathy Tripp of Aon Hewitt, a consulting firm.

Other potential changes include dropping dental and vision benefits, ending retiree coverage and increasing copays for using brand name drugs and specialists.

Martha Lynn Craver
Associate Editor, The Kiplinger Letter