Facing Higher Health Costs

In the health care reform debate, the escalating cost of health care is cited as one of the primary reasons for reform. And the rapid rise in the cost of health care is often attributed to the reimbursement model and that people who receive health insurance through an employer or through the state are insulated from the actual price tag for the care they receive. Many contend that if more consumers were directly responsible for a larger portion of the cost of care, then they would influence the marketplace and costs would go down. However, some consumer advocates insist that if employees shoulder a greater share of cost, then they will avoid preventive care and drive costs up, in addition to being unable to afford the care they need.

An article titled “Employees face 'shockingly higher' health costs” by Parija Kavilanz posted today on CNNMoney.com examines the growing trend of employers shifting the cost of health coverage to employees.

It's open enrollment time at work. Prepare yourself. Starting in 2010, your employer is making sure that when it comes to paying for your health care, you're going to be sharing much more of the burden.

"The headline is greater cost sharing," said Tom Billet, senior consultant with human resources consultancy Watson Wyatt. "That means higher [employee] contributions, higher deductibles, or both," he said.

In 2010, employers are "putting everything on the table," implementing benefit changes aimed at making workers more aware of the actual cost of services," said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute (EBRI), a public policy research group.

Barry Schilmeister, health care consultant with Mercer, a global firm specializing in employee benefits, agrees.

"Most people are shielded from the true cost of care because all they pay when they go to the doctor is a $15 to $20 co-pay," he said. "To me the catch phrase in 2010 will be 'Taking responsibility.' "

Consumer advocates, however, aren't thrilled with these declarations.

"We recognize that this is a hard economy," said Cheryl Fish-Parcham, deputy director of health policy with Families USA, a health care consumer advocacy group.

"We know that medical debt is growing. We know that [employer-based] coverage is thinning," said Fish-Parcham. "This is a really difficult environment for everyone. That's why we're all looking forward to health reform."

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Higher out-of-pocket costs
"Employers and employees will face shockingly higher [health care] costs," warned Helen Darling, president of the National Business Group on Health, whose members include Fortune 500 companies such as American Express, Coca-Cola and IBM.

Companies are raising deductibles, co-payments and employee out-of-pocket limits. "In better economic times, employers are better able to shoulder the [health care cost] burden. Not as much now," said Billet, who estimates that costs could increase between 10 to 20% for insured workers.

Besides the economy, Billet said other underlying factors driving up health care costs include aging of the population, greater use of technology in health care and government cost-shifting.

"Medicare and Medicaid typically pays providers less than the actual cost of care," he said, adding that providers make up the difference by raising their rates to their insured clients.

Co-pay to co-insurance
Darling said companies have been shifting over the past five years from a co-pay, a flat dollar fee ranging between $10 and $35 that employees pay at each doctor visit, to a to co-insurance model.

With co-insurance, employees pay a percentage of the total medical expense. Experts say co-insurance rates are typically split 80-20 or 70-30 between the health plan and the insured worker.

"By changing to co-insurance, people are more aware of costs and the hope is that they'll be more careful about how they spend their [health care] dollars," said Schilmeister.

Billet, whose corporate clients include Time Warner, the parent company of CNNMoney.com, said co-insurance used to be the norm prior to the advent of health management organizations (HMO). "So it's almost like a back to the future," he said. Time Warner is shifting from a co-pay to a co-insurance model next year.

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Consumer-directed health plans
About 20% of large employers offer consumer-directed health plans (CDHP), up sharply from 14% last year, according to Mercer.

These plans, which couple catastrophic illness coverage with employee-funded health savings accounts (HSA) or health reimbursement accounts (HRA), are 20% less expensive than traditional preferred provider organizations (PPOs) and HMOs, said Schilmeister. CDHPs usually have much lower premiums, although the deductibles are higher than other options. Some employers do help workers with the high deductibles by contributing money into their HSAs.

Still, Schilmeister said CDHPs probably make more sense for a healthy worker who doesn't utilize medical care frequently. Otherwise they can be expensive for employees.

"Be careful with these," said Fish-Parcham. "If employers aren't funding your HSA, it can become a huge problem especially for lower-income workers."

If employers increasingly shift health coverage costs to their employees, as those quoted in this article predict, what will be the impact on the cost and quality of health care in this country and the reform efforts in play in Washington?

Comments

[thé]

You can reduce the health cost by change in lifestyle. Doing Yoga, Meditation and exercise will help you a lot. For general disease like cold and cough, home made remedies should be used.

[engraving raleigh]

Is this true ?

Regards

[Cheap Insurance]

For some reason people don't want to pay for medical insurance. Some where some how the seed has been planted that Society should pay for each other. Back in the old days if you got sick and nobody was available to take care of you then you die. That system has worked for many many years.

[Chris Taus]

Take good care of yourself, Eight out of 10 health problems are treated at home. By doing a good job of self-care you can reduce your health care costs.