Health Cost-Shifting Puts Burden on the Unprepared

Employers can take steps to help

By Stephen Miller, CEBS June 2, 2014

More employees are facing higher health insurance premiums and co-payments, and many don't have the money to cover unexpected medical expenses, according to findings in the 2014 Aflac WorkForces Report.

In 2013, 19 percent of U.S. companies had in place a major medical plan with a high deductible (more than $1,000) and health savings accounts as an alternative to a traditional medical plan, according to the study, sponsored by Aflac, a provider of voluntary insurance benefits.

Concurrent Findings

The Kaiser Family Foundation recently reported that in the past six years the number of workers covered by high-deductible health plans has quadrupled, from 5 percent in 2007 to 20 percent in 2013. And a report from benefits firm HighRoads and consultancy CEB showed that employer plans with high deductibles (at least $1,250 for individuals or $2,500 for families) grew to 25 percent in 2014, up from 23 percent in 2013.

But employees are worried about covering their medical costs, the Aflac results showed:

  • 49 percent have less than $1,000 to pay for unexpected out-of-pocket medical expenses.

  • 53 percent would borrow from their 401(k)s or use credit cards to cover unexpected medical costs.

  • 66 percent say they wouldn't be able to adjust to the large financial costs associated with a serious injury or illness.

“Shifting more of the cost burden and health care purchase decisions to employees are only effective financial measures for the company if they lead to smarter employee choices and behaviors,” said Teresa White, executive vice president and chief operating officer, Aflac Columbus. The research surveyed 1,856 employers and 5,209 employees at small, medium and large U.S. companies in January 2014.

The Bottom Line

The Aflac study identified employers’ desire to control the bottom line as a likely driver of benefits changes in 2013. Almost half (49 percent) of employers agreed that controlling costs—including health and/or medical expenses—was the top business issue facing companies today, up from 28 percent who agreed that controlling costs was their top business concern in 2011.

More than half of companies (56 percent) increased employees’ co-payments and/or employees’ share of premiums in 2013, and the trend shows no signs of slowing, with 59 percent of employers saying they intend to do the same in 2014.

Among other cost-related trends, businesses last year:

  • Changed some full-time workers to part-time workers (21 percent).

  • Reduced the number of major medical plan options (14 percent).

  • Offered employees health insurance through the new federal and state government exchanges for small businesses (under the Small Business Health Options Program) or moved employees’ health insurance to a private exchange (7 percent).

  • Decided to give employees a stipend to use to purchase their health insurance plan through the public exchanges instead of offering insurance (6 percent).

The employee portion of most workers’ health care insurance, including premiums and out-of-pocket costs, has risen at a rate three times greater than their average salary increases over the past three years, according to the Kaiser Family Foundation.

Helping Employees Cope with Cost Shifting

High-deductible health insurance plans are a fact of life, but cost shifting doesn’t have to hurt morale or loyalty among workers, reports

  • Arming employees with all the information about the plan, ensuring they know which doctors are in network and out of network, and all the benefits associated with the plan (including preventive care), can go a long way in keeping out-of-pocket costs down.

  • Some employers who contribute to health savings accounts (HSAs) can increase their contribution to offset any bad feelings from offering a high-deductible plan.

  • Brokers work with employers to create a health plan that limits the cost sharing for hospitalization, surgeries and outpatient procedures; for instance, a medical bridge policy can be taken out to insure employees from high deductibles associated with those expensive but less frequent medical needs. (But be aware that HSAs may not be allowed if employees are offered supplemental health insurance that pays expenses under the deductible.)

​Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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