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Employers to Raise Health Care Costs, Cut Coverage

September 15, 2009

Even as the watered down health care reform legislation from the Senate Finance Committee is finally being delivered to growing concerns, a new study is shining a spotlight on questions the Baucus bill fails to address. Following an analysis from PriceWaterhouseCoopers earlier this year, the survey from the Kaiser Family Foundation confirms American employers are planning to raise health care premiums, slash benefits and, increasingly, drop coverage for their workers.
The Kaiser report is just the latest symptom of the rapidly deteriorating system of employer-provided health insurance coverage. A 2007 report from the Economic Policy Institute showed a dramatic decline in employer-provided health care. That drop-off from 64.2% of Americans covered through workplace insurance in 2000 to just 59.7% in 2006 alone added 2.3 million more people to those without coverage. Census data since showed workplace coverage dipped further in 2007, down to an alarming 59.3%. A recent Thomson Reuters survey put the figure for 2009 at a stunning 54.6%. (Last week's data from the U.S. Census revealed that it was only the expansion of government programs including SCHIP and Medicaid which offset the erosion of employer coverage in 2008.)
As the Washington Post reported Tuesday, the grim outlook for employer-provided health insurance is growing more dismal still:

Forty percent of employers surveyed said they are likely to increase the amount their workers pay out of pocket for doctor visits. Almost as many said they are likely to raise annual deductibles and the amount workers pay for prescription drugs.
Nine percent said they plan to tighten eligibility for health benefits; 8 percent said they plan to drop coverage entirely. Forty-one percent of employers said they were "somewhat" or "very" likely to increase the amount employees pay in premiums -- though that would not necessarily mean employees are paying a higher percentage of the premiums. Employers could simply be passing along the same proportional share of the overall increase that they did in 2009.

To be sure, Americans' health care expenditures are spiraling out of control, expanding at triple the rate of wages. That annual tab now tops $12,000. Of that, a recent analysis by the Center for American Progress found that "8 percent of families' health care premiums--approximately $1,100 a year--is due to our broken system that fails to cover the uninsured."
And with successful Republican obstruction of Democratic health care initiatives, those jaw-dropping costs would only continue their steep climb. A new report from the consulting firm PricewaterhouseCoopers forecast employers will face a 9% increase in health insurance costs in 2010. 42% of those business surveyed will pass at least some the new burden on to their workers. As PWC's Michael Thompson concluded in June:

"If the underlying costs go up by 9%, employees' costs actually go up by double digits," he said, noting that will have a "major, major impact" when many employers also are freezing or cutting pay.

Here's a snapshot of just how "major" that impact will be for American families. Pointing to data from the actuaries at the Centers for Medicare and Medicaid Services, the Center for American Progress warns that per capita medical costs are forecast to rise by 71% over the next decade. That would catapult the cost of the average family's insurance policy from $13,000 a year to over $22,000 by 2019.
As the Post detailed, business groups themselves are also ringing the alarm bell. A new report from the Business Roundtable concluded, "If current trends continue, annual health-care costs for employers will rise 166 percent over the next decade -- to $28,530 per employee." Antonio M. Perez, chief executive of Eastman Kodak and a leader of the Business Roundtable, echoed President Obama's warning Wednesday that "I will not accept the status quo as a solution":

"Maintaining the status quo is simply not an option. These costs are unsustainable and would put millions of workers at risk."

And so it goes. A day after the New England Journal of Medicine reported that 63% of doctors it surveyed favor the choice of a public option in a reformed U.S. health care system, it is clear that Senator Baucus will proceed without one. And with its limited subsidies for the growing number of working Americans who will lose their workplace insurance, that system will remain in critical condition.

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Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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