Insurelane Insurance Blog

There’s a good chance you already know it, but if you don’t here’s some news for you, employer insurance costs are rising for American workers. And to make matters worse, even though the premiums have gone up by 41 per cent since 2003, researchers at the Commonwealth Fund state that employees are actually getting less coverage for their money these days. They also said deductibles have shot up by a remarkable 77 per cent.

The future doesn’t look much brighter because if the rates continue to shoot up at the same rate as the last seven years it’s believed that annual premiums that are shared by workers and their bosses would increase by a total of 79 per cent by the time 2020 rolls around. If that happens, the average American family will be paying about $23,342 for coverage by then.

But if the new health care act can slow things down by even just one per cent, it would mean savings of $2,323 by 2020. The premium increases between 2003 and 2009 varied in each state, from 21 per cent in Delaware to 59 per cent in Louisiana.

Insurance premiums were the highest last year in the states of Connecticut, Alaska, Massachusetts, Wisconsin, Wyoming, and Vermont as premiums for families were over $14,000 a year. The states that paid the lowest costs were Alabama, Arkansas, Hawaii, Idaho, Kansas, Montana, North Dakota, Ohio, Oklahoma, South Dakota and Utah. The premiums here ranged between $11,000 and $12,000.

And while deductibles also went up, the number of employees paying them did as well. In 2009 74 per cent of workers were paying them compared to 52 per cent back in 2003. One of the biggest blows comes when comparing incomes and health insurance rates as the research found insurance rates were going up three times higher than average incomes.

In 26 states the premiums represented 18 per cent or more of the household income. Back in 2003 only three states were dishing out their money for premiums at that rate. The worst hit areas are in the Southern and south-central states because premiums are generally higher and wages are lower there.

The report, which was released on Dec. 2nd and featured in Bloomberg Businessweek, added that some of this hardship could be alleviated by the new Affordable Care Act.

Virginia lawmakers, Governor Timothy Kaine, and a charity healthcare organization are teaming up to offer low-income residents working in small businesses health insurance.

The program subsidize one-third of an employee’s health plan premiums. The employer and the worker will be responsible for the rest. The subsidies will be targeted at those working in small businesses who earn less than 200 percent of the federal poverty level.

“We are really excited about this. It’s targeted to help the working uninsured,” said Marilyn B. Tavenner, the state Secretary of Health and Human Resources.

This new program will be funded by the state and the healthcare charity, the Riverside Foundation.

Governor Kaine has allotted $500,000 over two years for the program and the Riverside Foundation kicked in $1 million, reported the Newport News Daily Press.

“It looks like it could be a win-win situation, where we actually expand public-private partnerships and we provide incentives, so that maybe some small businesses can provide health-insurance coverage to people who are currently uninsured,” said state Delegate Phil Hamilton.

The program is scheduled to start in July.

“I wholeheartedly endorse the project,” added Delegate Hamilton.

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Four U.S. Senators recently introduced a bipartisan bill that would provide health insurance tax relief for small businesses and the self-employed.

Senators Dick Durbin, Olympia Snowe, Norm Coleman, and Blanche Lincoln all worked together to create the legislation.

The bill would give small businesses a $1,000 tax credit per employee if they pay for at least 60 percent of premiums. If an employee has family coverage, employers get $2,000.

Some states have small business health insurance pools, where private insurance companies are required to provide coverage.

The measure prohibits insurers from excluding pre-existing conditions, denying coverage, refusing coverage renewal, and considering health status in these pools, wrote a New York Times blog.

People who are self-employed also would get tax relief — $1,800 in tax credits if enrolled in an individual plan and $3,600 if they have a family plan. Self-employed workers would also be able to purchase health insurance from a small business pool.

The bill now has to work its way through the U.S. Senate. But because of higher priorities, the measure isn’t expected to come to a final vote until the end of the year.

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In a recent Senate bill, North Carolina lawmakers voted in favor of mental health parity 36 to 12. Mental health parity requires companies providing group insurance for businesses to cover the costs of mental illnesses just as they would any physical ailments.

As North Carolina’s law stands today, mental illnesses are not required to be covered by any plan. And lawmakers have been fighting to pass mental health parity for some time.

“Mental health parity legislation has been debated by this General Assembly for over 15 years now, and I’m pleased to say that we’ve reached some common ground,” said Democratic State Senator William Purcell.

A House version of the bill was also approved, but had some key differences from the Senate. The House bill would require all mental illnesses to get full coverage, but small businesses with less than 25 employees would be exempt from the law. The Senate’s version would include businesses of all sizes, but only mandates full coverage for 9 of the most common mental health conditions, reported the Winston-Salem Journal.

Opponents of the mental health parity law contend it would be too costly for small businesses. They also argue it will result in higher health insurance costs for everyone.

“This is just another burden on small business. They have about 48 separate mandates for coverage now, and how much more can we put on them?” said Republican State Senator Robert Pittenger.

Advocates counter mental health parity among private companies would lower overall costs for the insurance system — giving people earlier access to mental healthcare which lowers their chance of needing state-funded mental care. They also point out costs haven’t drastically increased in many of the other states where mental health parity had been passed.

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In the United States, some 800,000 workers between the ages of 55 and 64 retire early — and become uninsured. When they retire, they are ineligible for employer-sponsored coverage and are too young for Medicare coverage.

The HR Policy Association has designed the Retiree Health Access program, which provides affordable health insurance for early retirees. Coverage will be administered by Aetna, and will be included in the workers’ employer-sponsored plan.

But the coverage will cost “relatively little for employers,” said Aetna’s executive vice president, Mark Bertolini, to the New York Times.

Depending on the amount an employer would like to contribute, health plans will have a deductible of $500 to $1,000 — and a monthly premium of $400 to $1,200. Anyone eligible for coverage won’t be turned down regardless of their health conditions.

The program isn’t expected to make a huge dent in the number of uninsured recent retirees when it starts in 2008, but the HR Policy Association hopes many of the 250 employers they represent will eventually participate.

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A recent New York Times article points out a new trend in group health coverage — employers setting “wellness goals” for their employees. A healthier workforce means lower insurance premiums, and employers are willing to try nearly anything to keep their costs down.

At Intuit, a California software company, employees are paid $100 to take a medical questionnaire. The questionnaire is designed to catch potential health problems and point employees toward solutions.

Another company, BB&T Corporation, gives workers a 20% discount on their insurance premiums for answering a questionnaire, providing a blood sample, and taking a fitness test. Employees with potential health problems are assigned a nurse who helps set health and fitness goals.

Some experts see this as step in the right direction for American healthcare. They argue that the American healthcare system has traditionally placed too much emphasis on treating health problems rather than preventing those problems in the first place.

However, others are raising privacy concerns as employers take a more active role in their workers’ health. Current U.S. laws, including the Health Insurance Portability and Accountability Act and the Americans with Disabilities Act prohibit employers from having access to specific health information about individual employees. Even so, privacy advocates worry that such data could be used inappropriately when managers decide which employees deserve to be promoted and which should be laid off.

Advocates of “Workforce Wellness” dismiss these concerns.

“While anything is possible, there are already a fair number of protections in these laws to try to protect employees,” said Andrea I. O’Brien, a Washington lawyer who specializes in employee benefits.

“There's nothing helpful for us in knowing it,” said Steve Reeder, benefits manager at BB&T. “We certainly don’t want managers to know that information and making bad decisions based on that information.”

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A new survey by the National Business Group on Health found that 75% of workers rank health insurance as the most important benefit offered by employers.

The survey also found that workers are unwilling to trade health benefits for other benefits, such as retirement savings plans. Workers were in favor of charging smokers more for health benefits, but were generally against charging obese people more for benefits.

A majority of workers — 67% — also considered their current health plan to be “excellent” or “very good.” Among the qualities workers value in their plans:

• Easy plan management
• Freedom to choose care providers
• Cost limits on care and prescription drugs

“Providing cost-effective, high quality health care benefits to workers and their families is one of the greatest challenges that Corporate America is facing,” said National Business Group on Health president Helen Darling. “Employers are spending millions and millions of dollars to provide health care benefits, and we hope the results of this survey will give them valuable insight from employees and help them develop and design programs that best meet their overall needs.”

The survey was conducted online, and included 1,619 randomly selected workers. At the time of the survey, every included worker was between 22 and 69 years of age, and was employed by a company with at least 2,500 employees. The survey’s margin of error was plus or minus 2.5 percentage points.

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Colorado’s House of Representatives is expected to introduce legislation to roll back a law that allows insurance companies to set small group insurance rates based on members’ health.

Currently, companies selling small business health insurance are able to charge higher plan rates based on age, location, industry, existing medical conditions, and claims history of their members. The law only applies to businesses with less than 50 employees.

Supporters of the new bill say small businesses and employees are hurt with unfairly high insurance premiums because of this law.

“[The goal is to] make health insurance for small business more affordable and more easily accessible,” said State Representative Tom Massey. “We hope to increase coverage.”

The measure is facing strong opposition from the insurance industry. They argue the roll back will decrease competition in Colorado, leading to higher rates in the long run.

Industry representatives also point out there is a provision in the current law offering discounted rates for healthier members. If the new legislation is passed, the discounts will be taken away. One study done by the Colorado Association of Health Plans found twice as many small businesses benefit from the current law then are hurt.

But lawmakers still contend that the higher set rates are making health coverage too expensive.

“We think it will be very beneficial for small businesses in Colorado. And long term, it will benefit Colorado’s economy,” said Massey.

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For 3 years, the National Council on Compensation Insurance (NCCI) miscalculated their expected losses — resulting in inflated premiums for many Missouri businesses’ workers compensation policies.

The error occurred due to the omission of historical payroll information in 2003, 2004, and 2005. Insurance companies use the payroll information to set premiums.

The Missouri Department of Insurance, Financial Institutions and Professional Registration was paid roughly $2.5 million to refund overcharged businesses throughout the state.

Approximately 51,000 workers compensation policies were reviewed by the Department of Insurance in 2006 find who was affected by the error. Of the 51,000, around 21,000 businesses received refunds. The average refund was $121 and the largest refund was $107,259, as reported by the Associated Press.

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Vermont businesses IBM, Harpoon Brewery, Jolley Associates, Verizon, and Vermont Easter Seals have all committed to joining a national initiative to improve healthcare quality for American employees. Vermont Governor Jim Douglas, Health and Human Services Secretary Mike Leavitt, and executives from the Vermont companies all met to sign statements in support of the initiative.

The initiative calls for businesses to provide detailed information about the prices charged and the quality of care delivered by doctors, hospitals, and other healthcare providers. With this information, employees will be able to make informed decisions. It is also hoped that the market pressure brought by consumers “shopping around” for the best quality and value will help contain healthcare costs.

“With the commitment that employers like these are now making, this situation will change,” said Secretary Leavitt.

“Patients will come to expect quality and performance information about healthcare providers. They will expect to have price or cost information in advance to make good value decisions about their care. They will use this information to improve health care value for themselves and their families. And the choices they make will help improve value and health care quality across the healthcare sector,” he added.

The national plan is based on 4 ‘cornerstones,’ that allow businesses to give their employees more choice in their healthcare. These cornerstones include supporting health information technology, providing incentives for better value in care, providing incentives for better quality, and giving employees more involvement in choosing care services.

“Until now, it has not been possible for patients to learn in advance about the quality of care they can expect to receive from a provider, or the cost of the services they will incur. By making this information available, employers can help their employees get better care and better value in health care,” said Secretary Leavitt.

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18% of Wisconsin farmers don’t have health insurance. 41% can’t afford to cover their entire family. But a new group health plan is changing that. Farmers’ Health Cooperative of Wisconsin will give farmers and agricultural workers affordable access to comprehensive health insurance.

Group health insurance was previously unavailable for farmers, who had to buy more individual health insurance. And farmers’ spouses had to find work off the farm strictly for insurance purposes.

With the Farmers’ Health Cooperative, farmers will be able to get individual and family health plans choosing from a range of deductibles — ranging from $500 to $5,000. They’ll also get needed coverage for workplace injuries, along with covered preventive care and prescription drugs.

But the Cooperative warns that the new group health plan isn’t necessarily a cheaper alternative — it’s a more comprehensive alternative, providing farmers with better health insurance benefits for similar rates.

“We are not going to misrepresent this. It is not bargain basement health care,” said Bill Oemichen, president and CEO of the Wisconsin Federation of Cooperatives. “It’s a very, very competitive plan.”

The group health plan for farmers had been planned for 3 years. State law changes in 2003 helped initiate the program. This year, Democratic U.S. Senator Herb Kohl and Wisconsin Governor Jim Doyle were able to secure $4.4 million in Federal funding for the program.

“People are waiting in the agricultural community for an option like this that will provide the health care they deserve,” said Wisconsin dairy farmer, Sandi Cihlar.

Farmers, agricultural workers, and their families will be able to enroll in the group plan starting April 1st.

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Even though employer-sponsored benefits are on the decline, many companies are still committed to offering them to their workers. Prudential Financial has released a new study that suggests employers view benefits as a crucial part of attracting and retaining a competitive workforce.

Even so, the cost of offering benefits continues to go up. To offset expenses, many employers are sharing more healthcare costs with their employees. By 2010, the number of employers offering “cost-sharing” plans is expected to double. Many cost-sharing plans deduct a larger percentage of premiums from employee paychecks. Another cost-sharing strategy offers voluntary benefits, with employees paying the entire premium.

An increasing number of employees — called “The Progressives” in the Prudential study — are attempting to reduce costs by improving overall health within the workplace.

“(P)rogressive firms focus on programs that manage risk rather than chase costs, such as wellness and prevention, disease state management, mental health counseling and work/life balance initiatives,” said Ed Baird, the president of Group Insurance for Prudential Financial.

Prudential expects at least 50% of employers offering insurance to be using the Progressive model by 2010.

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Even people with employer-sponsored health coverage are feeling the healthcare pinch. A new cost estimate projects that the average cost in premium contributions and out-of-pocket medical expenses will increase by almost 8%. In 2007, the average yearly cost will be $3,305 a year. The rise in premiums alone is expected to take $140 a month out of workers’ paychecks.

The employers who provide these plans are going to see their costs go up, too. The increase in employer contributions is being estimated at 7.7% — putting the average contribution at $8,340 for each employee.

“The true dollar cost is still a significant amount,” said David Stacey of Hewitt Associates, a Human Resources firm that conducted the study. “The true dollar cost is driving employers to make changes. The easiest thing for them to do is to shift costs.”

One reason for the increase in the average worker’s contributions is that more employers are promoting high deductible health plans and health savings accounts .

The study looked at data from 400 employers offering health insurance benefits. The 400 employers provide benefits to over 18 million workers.

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People with traditional health plans are more likely to be happy with their coverage than those with consumer-directed health plans, a new study by Employee Benefits Research Institute reveals. In addition, those with consumer-directed plans (insurance that combines a high deductible plan with a savings account to be used for health expenses) are more likely to put off needed health care.

Here’s how it breaks down:

31% of people enrolled in consumer-directed plans spent 5% or more of their income on out of pocket medical bills and premiums, compared to 12% of people with traditional plans.

35% of people with consumer-directed plans have avoided or delayed health services, compared to 17% of those with traditional plans.

For a closer look at the study, visit the Kaiser Family Foundation online.

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