Human Capital & Careers

It Hurts When I Do This

Survey shows fewer companies willing to shoulder cost increases. Who pays? Guess.
Stephen TaubMay 30, 2002

In an attempt to control spiraling costs, companies are increasingly requiring their workers to take on more responsibility for their health-care needs.

That finding comes from a newly released survey of 292 large corporations conducted by Watson Wyatt and the Washington Business Group on Health. More than 70 percent of employers in the survey said they made major changes in their health care strategy in the past year.

Not surprisingly, just 34 percent of the respondents said they are now willing or able to fully absorb cost increases. That figure is way down from last year, when half of the respondents said they could or would absorb increases in health benefit costs.

The survey also showed there’s been a clear shift in employer attitude and approach to containing health care costs within the last year.

“Employers are indicating that promoting individual responsibility for their own health care is a critical goal of their overall program,” says Maureen Cotter, global practice director of group and health care consulting at Watson Wyatt. “Increasingly, they are informing and empowering workers to make cost-effective decisions about the type and amount of health care that is right for them.”

Indeed, 43 percent of the surveyed employers said they expect to increase the level of “consumerism” in their health plans in the upcoming year. Less than one in five of the respondents said they already have such systems in place. “Consumerism is the code word for defined-contribution health plans,” says Cotter.

Toward that: Twice as many of the surveyed employers said they will provide workers with access to health care information over the next year.

In addition, the percentage of respondents that expect to provide direct access to purchasing health insurance is expected to jump to 8 percent next year. Currently, only three of the 292 employers in the survey provide such access.

Ironically, fewer companies in the survey said they plan to offer data to employees on the cost of health care services. In fact, the percentage of companies that provide information on specific health care issues is expected to fall from 28 percent to 25 percent next year.

“While some equate so-called ‘defined-contribution health plans’ with consumerism,” asserts Helen Darling, president of the Washington Business Group on Health, “it is clear that employers see it more broadly — more as a commitment to a philosophy or approach than simply to a particular health plan design.”

Many employers have had little choice but to offload more of the responsibility — and costs — for health care to employees. Employers expect their health-care costs per employee to rise by 12.7 percent in 2002, according to a recent survey of 2,800 large and small companies by William M. Mercer. This would come on top of an 11.2 percent hike in 2001 — and would raise the cost of an average corporate medical-plan to $4,924 per worker.

Ominously, some companies expect their costs to jump as much as 20 percent, according to the survey. And how are companies planning to cope with the those premium premiums? Well, 40 percent said they will require their employees to pay a higher share of the total cost by increasing the deductibles and co-payments.

Indeed, the median in-network deductible for preferred-provider plans (PPOs) rose to $500 from $250, among small employers, according to the Mercer survey.

About 16 percent of employees at small companies pay deductibles that exceed $1,000, says the survey.

To read more about rising health-benefit costs — and what employers are doing to limit those increases, read CFO.com’s special report,”Controlling Health-Care Costs“)

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