As health care premiums continue to rise, employers will increasingly shift the burden of costs to their employees. This is the overriding conclusion of a health care survey conducted by the UCLA Anderson Forecast that polled executives from 460 companies across the United States.
A whopping 85 percent of those surveyed said their health care premiums rose by at least as much as 10 percent over the past plan year, according to Dr. Christopher Thornberg, senior economist with the UCLA Anderson Forecast. Twenty-five percent of the respondents saw their premiums rise by more than 20 percent.
“What’s interesting about these results is that companies believe that the current [health-care insurance premium] increases are just the beginning of a longer trend,” Thornberg said in a statement. “Specifically, 80 percent of the companies surveyed anticipate that premiums will continue to rise by another 10 percent, while one quarter believe that increases next year will be more than 20 percent.”
Other findings from the survey:
- 27 percent of the companies reduced the level of benefits coverage.
- 41 percent increased premiums on coverage for dependents.
- 65.5 percent raised employee contributions to personal premiums.
- 75.5 percent raised co-payments or deductibles.
“The difference between the situation now compared to that in the late 1980s and early 1990s is that many employers are now simply passing on the increased healthcare costs to their employees,” Thornberg commented. In fact, the companies that altered their plans this year are more likely to transfer rising health care costs to their employees in the future, he noted in the report. Forty-two percent of respondents from companies that did alter their plans believe it is likely that the company will revise its plan again in the future if premiums continue to rise.
The surveys were completed by human resources managers representing a variety of large and small businesses.
Worse for Very Small Companies
Among those hardest hit with heath-benefits woes are so-called micro businesses and the self-employed.
More than two-thirds of about 600 owners of mini businesses say they are unable to afford health insurance for themselves or their employees altogether, according to a study by the National Association for the Self-Employed (NASE).
Seventy percent of the smallest businesses said they do not provide any type of health care coverage to eligible employees, according to the NASE “Affordability in Health Care” study. The main reason: Costs.
“Participants in the study say the situation is worsening as health insurance premiums for micro-businesses are increasing at double-digit rates while insurance benefits and plan choices are decreasing,” according to a press release accompanying the study.
“The businesses that can least afford it are paying disproportionately more than bigger businesses for access to quality health insurance,” said Robert Hughes, NASE president, in a statement.
The cost of health insurance premiums incurred by micro businesses increased by an average of nearly 13 percent from 2001 to 2002, according to the study. No surprise, then, that 96 percent of micro-business owners believe the cost of insurance is unreasonable for their business, and 46 percent say their employees cannot afford to share in the cost of coverage premiums.
One reason for the crisis afflicting very small companies is the inequalities in the tax code.
Under the current code, self-employed individuals must pay self-employment tax on health insurance for themselves and dependents. As for micro-business owners, they are subject to federal income tax and self-employment tax that larger businesses do not incur. Micro-businesses also frequently miss out on the economies of scale available to bigger businesses when purchasing health insurance.
Interestingly, 75 percent of the respondents said they would be likely to purchase insurance for employees if the premiums were 100 percent deductible. Nearly 80 percent said they would be likely to purchase health insurance for their employees if they were given tax credits. Eighty-four percent say they would provide insurance if they were able to deduct their premiums as a business expense.