Thursday, August 07, 2003
Copyright © Las Vegas Review-Journal

HEALTH CARE SURVEY: Coverage costs shifting to workers

Report says higher premiums force more plan revisions

Dr. Son L. Bui talks Wednesday to patient Cindy Mayhew at Rainbow Medical Center at 1341 S. Rainbow Blvd. Many local workers are paying higher premiums for health care. Photo by Christine H. Wetzel. Click image for enlargement.

As health care costs skyrocket and the economy lags, employers are shifting more of the burden to workers, requiring them to pay higher premiums, deductibles and co-payments while wages remain stagnant.

One-third of companies responding to a local business survey said they substantially revised employee health care benefits as a result of increasing premiums in the past year.

Nearly 70 percent said the probability was "somewhat likely" to "very likely" that they would substantially revise their coverage plan as premiums continue to rise.

The survey, conducted by the University of Nevada, Las Vegas' Center for Business and Economic Research and the Las Vegas Chamber of Commerce, exposes the financial crunch being felt by businesses trying to respond to a growing health care crisis across the nation.

"In periods of economic slowdown, generally profits are being compressed and at the same time costs are going up in terms of workers benefits. That's difficult for business owners," said Keith Schwer, director of the UNLV research center.

"Also, from the employees' standpoint, the cost is being passed on to them. The interest here is what people are actually doing to address the issue."

The survey showed that 13.5 percent of companies raised employee contributions to personal premiums, 14.6 percent raised co-payments or deductibles and another 14.6 percent reduced the level of benefits coverage. More than 3 percent increased premiums on coverage for dependents.

"With health care costs rising rapidly and no solution on the horizon, workers can expect to pay more and get less coverage," said Drew Altman, president of the Kaiser Research Foundation.

The foundation released a survey last year showing a 12.7 percent increase in employer health insurance premiums, the largest in 12 years. Premiums were, on average, $3,060 for single coverage, $7,954 for families.

The amount employees pay for coverage has risen substantially. Single workers pay an average of $454 a year, a 27 percent increase from the previous year; family coverage rose 16 percent to $2,084.

One out of five companies surveyed in Las Vegas said their premiums increased by 10 percent to 20 percent this year, and a quarter of them put the increase at 20 percent to 30 percent.

Peter O'Neill, spokesman for Sierra Health Services, a major medical insurer in Nevada, said he concurs with the results of the survey.

"In particular, employers are looking more and more to share health care costs with employees. That's a trend that's nationwide," he said.

"One thing I would point out, historically if you compare the Las Vegas market to other markets, our health care costs are going up at a slower rate."

The three major drivers to rising health care costs are prescription drugs, physician care and hospital care, which accounts for 35 cents to 40 cents of every $1, O'Neill said.

"We do work with businesses to design lower cost options, and that typically involves more out-of-pocket costs for employees, which is why people have become more savvy about generic drugs and out-of-pocket costs they incur," he said.

The health care industry has an inflation index of its own that's substantially higher than the general economic index, said David Dahan, chief executive officer of Orgill Singer & Associates insurance company in Las Vegas.

"Certainly the cost of prescription care has gone up dramatically, along with the cost of a physician's reimbursement," he said.

"The trickle down (of costs) starts even higher than the insurance carrier. However, I am optimistic about the future. It's stabilizing. All of us must become more innovative and maximize the way we're buying health care."

Altman of the Kaiser Foundation said it will be even harder to tackle health care's big-ticket problems such as providing drug coverage for seniors and covering the uninsured.

More than 41 million Americans were without health coverage in 2001, according to the U.S. Census Bureau, and 80 percent of the uninsured lived in households with working members.

Thirty percent of health care cost increases are attributed to the rising cost of prescription drugs between 1995 and 2000, according to the Alliance for Health Reform.

Some firms are simply giving employees cash to buy their own health insurance, sometimes called a "defined contribution" plan. However, nearly 80 percent of companies responding to the CBER survey said they were not likely to go that route.

Service was the principal activity of 40 percent of businesses responding to the health benefits survey, and 58.6 percent of them had 10 or fewer employees.

"Medical costs continue to rise even though inflation has been reduced," Schwer said. "And again, it reflects a large number of things, one of which is the demographic profile. We're getting older, and as you get older, you have more health problems."

That has created financial troubles for Medicaid and Medicare, which in turns pushes up premiums for everybody, Schwer said.

The Kaiser Commission on Medicaid and the Uninsured reported that two-thirds of states implemented or planned a second round of Medicaid cuts halfway through fiscal year 2003, which began in summer of 2002.