When it comes to health insurance, employees got less coverage for more money this year.
Rate hikes forced employers to drop health plans and cut benefits this year, even as average cost of employee contributions to health plans rose 14.7 percent, according to a report released Monday. The report by Mercer Resource Consulting also found that employers are shifting more prescription drug benefit costs to employees and projected an average increase of 14 percent in employee healthcare costs next year.
The hikes in employee contributions were the largest since 1990, according to the study.
“Many of the largest employers have crossed their threshold of pain already,” said Tom Tomczyk, a consultant in Mercer’s Pittsburgh office. “We’re starting to see the gloves come off in their cost management efforts.”
The average employee is costing his employer $5,646 this year in health costs, up 56 percent from $3,594 only five years ago.
While larger employers often scale back the coverage offered, small employers are often faced with the decision of whether to offer any coverage at all. According to Mercer’s study, the percentage of employers with 10 to 49 employees offering a health plan fell from 66 percent to 62 percent in 2002.
While some employers are leaving health maintenance organizations voluntarily, others are reducing their workers’ options. Large employers, who typically hold contracts with several HMOs have dropped some health maintenance organizations – presumably, the ones with the highest renewal rates.
The trend has been especially marked by employers with 20,000 employees or more, who now hold an average of 24 HMO contracts, down from 32 in 2000.
“In the 1990s, the ultimate cost-management strategy was to increase HMO enrollment,” Tomczyk said. “Now employers are eliminating poor-performing HMOs, even if it means moving employees into less-managed plans.”
Nearly 2,900 employers participated in Mercer’s survey. Mercer sampled all employers with at least 10 employees in the survey, which represents about 600,000 employers and more than 90 million full- and part-time employees.
Copeland is a reporter for the Tribune-Review.