Expect to Pay More for Health Coverage Through Work

What changes can I expect to see in my employer’s health insurance coverage during open enrollment this fall?

The National Business Group on Health just announced the results of its annual survey of large employers and their health coverage plans for the coming year, and several trends are likely to continue for 2012: Most people will have to pay higher premiums for coverage plus a larger share of the cost for each doctor’s visit and procedure. Meanwhile, more employers will offer high-deductible health plans with health savings accounts and will encourage employees to choose that option by contributing money to the HSAs. Employers are also investing in wellness programs to help control long-term medical expenses.

The employers surveyed estimate that their health care benefit costs will increase by an average of 7.2% in 2012 (on top of a 7.4% increase in 2011), and they’re asking employees to pick up a larger share of the expenses. Generally, employers pay about 80% of the premiums and employees pay the other 20%, but more than half of employers plan to increase the percentage that employees contribute to premiums in 2012.

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And premiums aren’t the only costs that are increasing -- 39% of employers plan to boost in-network deductibles, 23% plan to increase out-of-network deductibles and 22% plan to increase out-of-network maximums that employees have to pay themselves.

Employers also hope to control expenses by providing incentives for consumers to pay more attention to their health-care costs: They continue to switch from fixed-dollar co-payments (for example, you might pay $20 for each doctor’s office visit) to coinsurance -- you pay a percentage of the cost of each office visit and procedure. “It’s a more subtle way to increase what consumers pay,” says Helen Starling, president and CEO of the National Business Group on Health. And it encourages employees to find lower-cost care, which will save both the employer and employee money. “If you don’t use coinsurance, the consumer doesn’t pay attention to the cost,” she says. “If the consumer has no financial stake, then there’s no hope for controlling health-care costs in this country.”

Employers are also offering incentives for employees to sign up for consumer-directed health plans. These are high-deductible health insurance policies paired with a tax-advantaged savings account -- either a health savings account (which lets people set aside pretax money that they can use tax-free for medical expenses, even after they leave that employer) or a health reimbursement arrangement (which provides similar tax benefits but isn’t portable unless the employee retires). About 73% of employers plan to offer employees at least one consumer-directed health plan option in 2012, up from 61% this year.

Most employers are pairing these high-deductible plans with a health savings account rather than a health reimbursement arrangement. About 17% of employers will switch entirely to consumer-directed health plans without offering any low-deductible health insurance option. A health insurance policy must have a deductible of at least $1,200 for individual coverage, or $2,400 for family plans, to qualify to be paired with an HSA. (For more information about HSAs, see Health Savings Account Answers.)

Employers are adding extra incentives to pick these policies by contributing a fixed amount to employees’ HSAs to help cover the higher deductible, offering matching contributions, or adding extra money to the accounts for employees who sign up for wellness programs. Only 20% of the employers surveyed aren’t contributing to employees’ HSAs.

Wellness programs are another way employers hope to control long-term health-care costs: 58% plan to offer discounts or other cash incentives to employees who participate in healthy lifestyle programs, with an average incentive of $383. Few employers are using a penalty approach to encourage participation, which was one way employers got people to sign up a few years ago -- now, only 12% charge a surcharge for employees who don’t participate.