Employer offerings vary in response to cost-benefit pluses

October 1, 2006

National Reports-Cost is a factor in employee enrollment rates, but lower-cost, exclusive-provider plans are less commonly offered, according to a recent survey conducted by the Agency for Healthcare Research and Quality (AHRQ).

NATIONAL REPORTS-Cost is a factor in employee enrollment rates, but lower-cost, exclusive-provider plans are less commonly offered, according to a recent survey conducted by the Agency for Healthcare Research and Quality (AHRQ).

"There have been a number of noticeable trends in health insurance offered by large employers [defined as those with more than 50 employees] between 1997 and 2004," says James M. Branscome, survey statistician for AHRQ's Center for Financing, Access and Cost Trends, Rockville, Md. "Employers are less likely to offer exclusive-provider plans and more likely to offer mixed-provider plans, even though the mixed-provider plans are more expensive for both the employer and the employee who enrolls in them."

Over the same time period, enrollments in health insurance plans by employees of large firms have steadily declined from 67.3% in 1997 to 62.8% in 2004, according to the Medical Expenditure Panel Survey (MEPS) of employers, an annual survey of more than 40,000 business locations throughout the United States.

"It doesn't appear that large employers are canceling coverage altogether but rather passing increased costs through to the employees in the form of higher premiums or less coverage-higher deductibles, copays, prescription drug costs, etc.," says Thomas F. Barrett Jr., president and CEO of CHOICE Medical Management Services LLC, a healthcare management organization focused on workers' compensation and disability. "As a result, it becomes cost prohibitive and some employees roll the dice, especially those who are in lower pay tiers. They opt to forgo coverage altogether thus becoming uninsured themselves and, if they have dependent children, they enroll their children in Medicaid."

Joe Paduda, principal of Health Strategy Associates, says employers have been able to retain most of the recent gains in productivity, generating larger profits while keeping wage and benefit expense increases under the rate of inflation. "Thus, the continued shift in insurance costs to employees is another tactic in the overall plan to maximize shareholder gains," he says. "Employers know that offering less costly plans with fewer benefits will encourage employees to seek coverage on their spouse's plan, thereby shifting the cost for that employee and their dependents onto another employer."

WALK THE LINE

Most employers walk the cost-benefit tightrope, says Barrett. "This is to be expected with healthcare costs escalating at the rate they have been-over a recent five-year period healthcare spending grew at almost twice the rate of the economy," he says. "On the one hand, employers are concerned about providing benefits that are robust enough to attract and retain a quality work force. On the other hand, they must be concerned about managing their costs in such a way that they remain competitive in today's global economy. Affordable healthcare should be the No. 1 domestic issue in our country."