Big Jump Seen in Health Costs for Employees
Open Enrollment Brings Steep Rise in Premiums; Paying More for the Kids
s companies begin unveiling their workplace benefits for next year, many employees are learning they will have to dig even deeper into their pockets for health coverage.
Such price increases have become a fact of life during open-enrollment season, when workers sign up for their health plans. But the jump is expected to be steeper in 2010 than this year, as employers struggle with the impact of the recession and continually rising insurance costs. Employees will pay $4,023 on average in premiums and out-of-pocket charges next year, up 10% from 2009, according to a projection from Hewitt Associates, a benefits-consulting firm. In dollar terms, it's the biggest boost since the firm started keeping track of the data a decade ago.
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For workers, that will mean larger payroll deductions, as well as spending more on co-payments and other fees tied to care. Companies also are expected to prod more employees into cheaper coverage by getting them to sign up for high-deductible health plans. And many employers are trying to rein in the expense of covering workers' families, sometimes by making insurance for kids and spouses pricier.
As a sweetener, some companies are offering new benefits, such as life insurance and long-term-care insurance, that employees can opt to buy for themselves. But workers need to look closely at such offers, because some people may be able to purchase these benefits more cheaply on their own.
Workers like Katha Rogers are already feeling the pinch. Ms. Rogers, 46, is a customer-service representative for Burton Metal Finishing Inc., a small family-owned company in Columbus, Ohio. She and other employees started paying sharply increased premium contributions this July. The firm had to ask them to chip in more because its health-insurance costs have been going up 10% to 20% a year, while the economic downturn hit its revenues, says co-owner Victoria Burton.
Ms. Rogers and her husband, who also works at Burton Metal Finishing, now pay $120 a month combined, up from nothing two years ago. They also face bigger co-payments and deductibles. Partly because of that, the family is trying to save money, including not taking any vacation trips. They've also canceled some doctor visits to avoid the new $50 co-pay. "You have to decide where you're going to cut next," says Ms. Rogers. Still, she says, she's grateful to have coverage in this difficult economy.
A patient reaches into his wallet.
No matter where you work, you will almost certainly be paying more for your coverage. But you may be able to choose between plans that boost your payout in different ways—mainly through higher paycheck withdrawals, or mostly in the form of increased deductibles, co-payments and co-insurance. Some companies are also offering reduced premiums in exchange for certain wellness activities, like taking a health-risk assessment.
You should take a close look at the options and not just focus on the premiums. Make sure you understand all the charges in the plans, including the maximum you could be responsible for paying out of pocket in a year. Check the details of the drug benefit, since employers are expected to get even more aggressive in cracking down on pricey brand-name medications.
Simulating a Claim
One helpful exercise is to think about a procedure or type of care you may need and try to pencil out how much it would cost you under each plan, says Sally McCarty, a former state insurance regulator who now consults with patient groups. Employees may even be able to get simulated claims scenarios processed by an insurer.
Eric Fein, 34, a Web developer who works for Affinity Federal Credit Union in Basking Ridge, N.J., this year got to choose between two plans, one with higher premiums and lower co-pays and deductible, and the other with lower premiums but more out-of-pocket charges. Mr. Fein says he opted for the bigger premiums, because the monthly costs weren't much higher, and he didn't want to find himself facing big bills if a back problem he had before cropped up again. "That way, I know I'm covered fully," he says.
Related Links
The best source of information about your workplace health benefits is your employer. Many are now offering online resources, including simulated claims processing. But here are some other online resources.
- A web site from insurer Aetna with open-enrollment tips:http://www.planforyourhealth.com/openenrollment/
- Sites with general information about health insurance: http://www.healthcarecoach.com/; http://www.healthinsurance.org/glossary/#P
- Sites with information about HSAs:http://www.treas.gov/offices/public-affairs/hsa/faq_basics.shtml;http://www.hsainsider.com/;http://www.hsafinder.com/
- Sites with basic background about long-term care, life and disability insurance.http://www.cahealthadvocates.org/long-term/index.html;http://www.ins.state.ny.us/clife.htm ;http://www.nahu.org/consumer/DIInsuranceguide.cfm
Paying for Basic Care
For Michele Butler of New York, any extra premium payment seemed like a waste. Ms. Butler, who is in her 40s, says she never sees a doctor beyond basic checkups like an annual mammogram. Her employer, the U.S. unit of London advertising agency Dewynters Ltd., decided this year to offer a choice of plans through HealthPass, a nonprofit insurance exchange. The company would pay the full premiums on one of the basic options, but workers could add their own money if they wanted a more expensive plan. That seemed like "an unnecessary extra expense," says Ms. Butler, a manager at the firm.
Around 60% of employers are expected to offer some form of high-deductible plan paired with a health-savings account or health-reimbursement arrangement, according to a survey by consulting firm Towers Perrin Forster & Crosby Inc.
Some companies that already had these plans are making changes that may merit another look by employees who rejected the options before. 3M Co., for instance, will make its high-deductible plan more attractive by trimming employee premium charges, while slightly raising premiums on its standard plan, says Jack Arland, director of benefits. 3M will also make its full contribution to employees' HSAs early in 2010, instead of parceling it out monthly, giving workers quicker access to the money.
If your family is on your plan, you should watch for changes that will affect their coverage. Benefitfocus Inc., which provides benefits software to more than 300,000 employers, says around a third of them are trying to trim spending on dependents.
The most common tactic is an audit to root out dependents who don't qualify for the plan. More employers are expected to do such audits this year, according to Mercer, a consulting unit of Marsh & McLennan Cos. If your employer hasn't done this before, you may want to check you're complying with its rules. Be ready to produce documentation such as marriage certificates and birth certificates.
Some companies, like engineering and planning firm Kimley-Horn and Associates Inc., are adding a monthly surcharge for workers enrolling a spouse who could get coverage from another employer. The Cary, N.C., firm, which has more than 1,600 employees, also is boosting workers' costs for family coverage by a bigger percentage than for individual plans.
The company's rich benefits were luring family members who had other options, adding to Kimley-Horn's costs, says Chief Executive Mark Wilson: "We're subsidizing, in effect, other companies."
Hits Against Families
If your employer is spending less for your children and spouse this year, it may make sense to rethink how you divide up your family's coverage. Two-career couples should carefully evaluate both employers' health plans.
A few employees, like Elaine Williams, an orchestra teacher in Lawrence, Kan., choose the individual insurance market. The 54 year old purchased coverage this September for her 20-year-old son, instead of including him on her workplace insurance. The school district pays the full premium for her plan, but she would have had to spend around $360 a month to add her son. His new plan cost about $100 less a month for more generous health benefits, she says. "What I was looking mostly at was the bottom line."
That strategy won't always work. Some family members with pre-existing health conditions will find it tough to buy their own plans. And employer-sponsored insurance often offers better value than plans purchased individually because of favorable tax breaks and richer coverage.
Big insurers Assurant Inc., MetLife Inc. and Unum Group all say they're seeing employers offering more insurance benefits that employees can choose to pay for themselves. A new employer survey conducted by the International Foundation of Employee Benefit Plans found 84% were providing such so-called voluntary benefits—most commonly life, vision, long-term care and long-term disability.
Benefits That Cost You
Brookdale Senior Living Inc. of Nashville, Tenn., has previously offered its 35,000 employees a range of voluntary benefits. Mark Mielenz, the company's senior director of benefits, says a new option will allow workers to purchase policies to provide extra help if they get serious conditions such as cancer. He says the added coverage could help offset increases in recent years in out-of-pocket charges in the workers' health plan.
Employees should take a close look before buying any new benefits. Check whether pretax dollars can be used to pay the premiums, which is possible with certain benefits but not all, according to MetLife.
And ask if the plan is portable if you change employers. Shopping around is worthwhile, since some people may find cheaper or more customized choices if they buy their own plans.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
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