Less concerns on health costs than retirement
Employers may have their eyes on spiraling health care costs, but most employees are focused on issues involving their retirement benefits, according to a new survey of employee benefits specialists.
Debora Karstetter, president of the International Society of Certified Employee Benefits Specialists, says employers’ fears about health care costs have not trickled down to the employee. The society sponsored the survey with the Human Capital Advisory Services practice of Deloitte & Touche, LLP.
A total of 280 benefits specialists responded to the survey, revealing for the second year in a row that 70% of employee benefits specialists surveyed identified health care costs as their top priority for 2001. The other concerns were:
• implementing, evaluating, or expanding Internet or intranet applications (57.9% of respondents);
• expanding employee "self-service" technology for communications and administration (45.4%);
• providing financial and retirement planning tools to workers (42.8%).
Issues related to retirement continue to top their list of concerns, which Karstetter says is a reflection of the aging of the nation’s work force.
Another survey indicates that, with employer-sponsored health benefit costs rising for the third straight year in 2000 and 2001 increases expected to reach an average of 11%, employers have been taking a variety of cost-cutting measures.
According to benefits consulting firm William M. Mercer Inc., the average cost per employee in 2000 jumped to $4,430 from $4,097 in 1999, and while few of those employers surveyed in 1999 said that they shifted those costs to their employees, companies now appear to be taking a different approach.
"Attraction and retention of employees is still a big issue," says Blaine Bos, a consultant in Mercer’s Chicago office and one of the study’s authors. "But in companies where shareholder demands and the pressures of global competition are driving the bus, controlling runaway expenses takes priority."
Of the 3,300 employers questioned in the survey, 40% said that they would increase employee contribution levels in 2001 and 17% said that they would raise deductibles, copayments or out-of-pocket maximums. In 1999, 21% of the survey respondents said that they would increase employee contributions and 9% responded that they would shift some of the cost to employees.
Additionally, large employers, those with 500 or more employees, said that they plan to shift the cost even farther. Fifty-eight percent of those employers said that they would raise contributions, and 26% said that they would shift cost through other cost-sharing provisions.
An even greater number of employers are pulling retiree coverage plans as a means of curbing expenses, the survey found. This year the number of large employers offering this kind of coverage to pre-Medicare-eligible retirees fell to 31% from 35%, and to 24% from 28% for Medicare-eligible retirees.
Looking at the downside
Mercer acknowledges a downside to offering retiree coverage, noting that employers reported an average 10.6% cost increase, to $5,537, over two years for pre-Medicare-eligible retirees and
a 17% increase, to $2,319, for Medicare-eligible retirees in the year 2000.
However, Bos warns that there also is a downside to not offering retiree coverage. "Without a retiree medical plan, employees wait longer to retire, which may delay career advancement for younger employees. And those employers trying to attract experienced, midcareer employees may find the lack of retiree coverage hurts them," he says.
Yet, as employers begin to pass certain health care costs along to their employees, the Mercer survey found that drug copayments have not kept pace. While drugs account for roughly 14% of the total cost of a medical plan, Mercer said, in 2000, the average per prescription employee copayment rose $1 to $8 for generic drugs, and $2 to $16 for branded drugs.
The survey also found HMO costs rising beyond those of preferred provider organization (PPO) plans, 9.6% vs. 7.7%, in 2000. Further, costs for point-of-service plans were up 10.1%.
"HMOs promised to bring cost increases under control, but now we’re seeing cost going up faster in HMOs than in less-managed PPO plans," Bos says. Yet on average, HMO coverage costs, arriving at $3,713, were about $300 less than PPO coverage in 2000.
The survey found a 2% increase, to 32%, in all employees covered under HMOs, with enrollment in POS plans holding steady at 16%, after years of decline. PPO enrollment was found to have remained unchanged at 44% after five years of solid growth, Mercer says.
Despite the cost increases of 2000, and the anticipated rise in costs in the upcoming year, the survey found that most employers would not be willing to take themselves entirely out of the picture.
When asked how responsive they would be to simply increasing employees’ pay and allowing them to find their own health coverage, only 5% of the respondents said that they would be very receptive, 18% said that they would be somewhat responsive, and 53% said that they are not at all responsive to such a strategy.
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