By Getahn Ward.
Pat Stella is pondering his options after being told by an insurance broker that premiums on his employees’ health benefits package could increase by as much as 11 percent next year.
"We usually give our employees more than one choice," the chief executive of Fire Sprinkler LLC said. "It could be we don’t — maybe we give them one choice."
Stella, whose Nashville-based company installs fire protection systems, isn’t alone. Many employers are considering changes, including raising co-pays on prescription drugs to increase their employees’ share of costs in a bid to curb growth in medical plan costs.
Such cost-cutting actions should reduce employers’ growth in costs next year to just below 6 percent instead of nearly 9 percent otherwise, suggest preliminary results of consultant Mercer’s annual benefits survey.
Responses from half of the 3,000 employers ultimately expected to participate show more cuts than usual being made in budgets for next year, with those hardest hit by the recession making the biggest cuts. Roughly 40 percent of respondents said they planned to ask employees to pay a higher portion of monthly premiums or increase co-payments, deductibles or out-of-pocket maximums.
Employers’ costs are rising in part from stress-related illnesses tied to economic worries. In some cases workers and their dependents are using more health-care services. They’re filling prescriptions, getting preventive care or undergoing previously delayed elective procedures while they’re on health plans for fear of losing coverage if laid off later, Mercer said.
Employers consider their options
Edward Scott, a consulting actuary with benefit consultants Bryan Pendleton Swats & McAllister LLC of Brentwood, sees more clients pricing plan options to keep premiums from rising and to avoid passing on too many costs to employees.
Tactics they’re using include lowering co-pays to steer employees toward plans with less-costly generic drugs and offering high-deductible health plans with health savings accounts. With those, money is set aside for employees’ medical costs that they can keep if they don’t use it.
"It changes their buying habits," Scott said. "They won’t spend unnecessarily if they know it’s their money and they can actually save it and use it later."
At Fire Sprinkler, Stella spent $168,000 overall on insurance for most of his 60 employees last year. The company covers about 90 percent of the costs, and employees pay the rest.
Stella should learn soon how much his costs would actually rise next year after his insurance broker recommends a list of plans that would take effect on Jan. 1.
"It’s a huge problem for us," Stella said, adding that health benefits account for nearly 9 percent of Fire Sprinkler’s overall costs.
Some companies are less likely to pass on cost increases because health benefits play a key role in hiring and recruiting employees, other analysts said.
Brentwood-based Cumberland Consulting Group, for instance, pays 100 percent of the health-care costs of its 55 employees — mostly consultants who help clients put technology to use. Cumberland sees that as a way to compete for talent against bigger consulting firms, said CEO Jim Lewis.
Some wait and watch Congress
Some employers, meanwhile, hope to hold off on drastic changes while they wait to see what changes Congress makes to the health-care landscape.
"You don’t want to make huge changes and then instantly find out that you can’t use those changes — that the rules of the game have changed," said Scott, the consulting actuary.
Stella is concerned that changes made by the government could end up costing employers more, but he also wants relief from rising health insurance costs. "It could have a major effect depending on what they do," he said.