Businesses Shift Premiums to Workers, Uninsured Rise
The latest figures show Oregon's uninsured rate is likely rising
$lefthorizontal$September 22, 2010 -- The affordability of medical insurance cropped up this month as studies showed the number of uninsured Americans rose by 4.4 million and that employers are shifting the burden of rising premiums to workers.
The U.S. Census Bureau reported the number of uninsured Americans rose to 50.7 million in 2009, compared to 46.3 million in 2008. The report did not include a breakdown of the numbers by state. However, in 2007-08, about 626,000 Oregonians lacked health insurance.
In a separate report earlier in the month, a survey of employers revealed, for the first time in a dozen years of tracking this data, that business owners were shifting nearly all of the additional costs of their medical plans in 2010 onto workers' shoulders.
The 2010 Employer Health Benefits Survey was sponsored by the Kaiser Family Foundation and the American Hospital Association's Health Research & Educational Trust.
Since 2000, premiums for employer-based medical insurance increased 138 percent, while employee contributions for family coverage rose 159 percent, according to the survey. It also found most of that gap occurred last year and workers paid for most of the increase. (See related charts)
“It’s the first time I have seen employers cope by shifting virtually all of the cost increases to workers,” said Drew Altman, president and CEO of the Kaiser Family Foundation. “From the perspective of working people, they’re just getting less for more.”
As a result, U.S. workers who paid $1,619 for family coverage in 2000 have seen their average contribution for this coverage more than double over the past decade, to $3,997, Altman said.
The Kaiser-Health Trust survey of employers, which is in its 12th year, gathered data by phone from 2,046 randomly selected businesses with three or more employees. It was conducted between January and May 2010 by the National Opinion Research Center at the University of Chicago.
The study did not break out state-by-state data. However, cost-shifting holds a larger potential impact for Oregon workers, because in 2009 and 2010 premiums both for group and individual insurance policies in Oregon increased more than the national average. In Oregon, 69.6% of adults who are employed full-time have employer-sponsored medical coverage, according to Census figures from 2007-08.
Medical and hospital costs in Oregon rose just 3 percent between 2009 and 2010, but premiums increased between 10 and 22 percent this year for 500,000 Oregonians covered by small-group and individual policies.
The employer survey found that, in addition to shifting premium costs to workers, employers strapped by the recession are saving money by offering less generous benefit packages.
For instance, the proportion of employer-based plans with deductibles of $1,000 or higher for individual coverage has nearly tripled in the last four years up to 27 percent. The figure was 10 percent in 2006, and 22 percent in 2009.
The situation is worse at the smallest firms, those with less than 200 employees, which in Oregon and elsewhere have higher premiums than large-group plans. About half (46 percent) of these employer-based plans have a deductible of $1,000 or higher, the survey found. The deductible is $2,000 or more at 20 percent of small firms and 4 percent of large firms, and the prevalence has risen steadily since 2006.
If higher deductibles continue to rise, this might destabilize the employer-based insurance system that forms the backbone of federal healthcare reform, Altman said.
"At some point, excessive cost sharing can become, one, a serious economic burden and, two, a real barrier to accessing health care for the people in these plans," he said.
A 2006 Commonwealth Fund study found that 44 percent of insured adults with high deductibles (greater than $1,000) whom the Fund’s researchers call “underinsured--adopted healthcare behaviors that are characteristic of the uninsured, such as not filling a prescription, skipping a recommended test or putting off doctor visits despite needing medical care.
Altman called the shifting of costs to workers “a very important issue that did not get enough attention in the debate” over health reform. An underlying premise of the new Patient Protection and Affordable Care Act of 2010, which Congress passed in March, was that employer-based insurance did its job well, he said.
“The debate was framed as: Don’t touch employer-based insurance. Basically that was the politics of health reform,” Altman said. “So while it does a tremendous amount for the individual market, it does not do much for those who obtain coverage through their employer.”
The increase in the number of uninsured Americans during 2009 demonstrates that further measures are needed to make insurance affordable for the middle class, said Karen Davis, president of the Commonwealth Fund.
"Of the 4.3 million increase in the number of uninsured, half have incomes over $50,000. ...[M]iddle-class families need immediate assistance," Davis said in a statement.
Rate increases in Oregon over the last several years might have been smaller if Oregon regulators set a limit on surplus insurers are required to have, a study by Consumer Union pointed out this summer.
These funds primarily represent "retained profits that are built with consumers' premium dollars," Consumers Union said. Insurers should not be allowed to justify higher rate increases by, in effect, concealing their profits in a reserve fund, the report said.
The report cited Regence Blue Cross Blue Shield of Oregon as an example. It had $565.2 million in a reserve fund at the end of 2009 – 3.6 times the amount required by law, the report noted. Yet Regence raised rates on some individual policies by an average of 25.3 percent in April 2009 and 16 percent in April 2010.
The big rate hikes in Oregon have occurred despite healthy financial reports by the companies. Oregon insurers had net income in the first half of 2010 equal to their total net income for all of 2009. They also had more than $1.9 billion in their reserve funds in June, up 13 percent from the end of 2009.
The recent large jumps in premiums also came despite declarations by state regulators that they would scrutinize insurers' rate increase requests more carefully. The state has receiveda $1 million federal grant to scrutinize future rate increase requests by the companies.
The Kaiser-Health Trust study also contained data on how quality improvement measures were faring as employers cope with their economic troubles--and the results were disappointing, said Megan McHugh, research director at the Health Research and Educational Trust.
Employers are the market segment with the greatest potential to steer quality improvement, but they appeared to be paying little attention to this issue, she said.
Overall, only 11 percent of businesses had plans giving employees the option of having their health risks assessed, and fewer still offered financial incentives for it, the survey found.
A third of the large firms (34 percent) and 5 percent of small firms looked at performance indicators, such as the Consumer Assessment of Healthcare Providers and Systems (CAHPS). However, in only about half of these cases was the information “somewhat influential” or “very influential” in selecting health plans, McHugh said.
“Firms might simply be choosing health plans based on price,” McHugh said.
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I am a business owner and we are faced with the prospect of passing the increased costs of healthcare onto our employees. Our margins are razor thin as it is and quite frankly the healthcare costs as well as the myriad of other taxes and fees that nickel and dime us to death are killing us. We are in a catch 22. We run the risk of losing good employees but on the other hand the increased costs will drive us out of business.
Here are Oregon's 2009 numbers from the Census' most recent survey:
Age 18 and under: 12.3%, and increase of 0.9 percentage points over 2008
Age 19 to 64: 23.5%, an increase of 2.0 percentage points over 2008
Age 65 and older: 1.6%, an increase of 1.2 percentage points over 2008
All ages: 17.7%, an increase of 1.4 percentage points over 2008