Passing along the costs

Milwaukee-area businesses were able to trim the increases in their health insurance premiums this year by making changes to their health benefit plans, according to the second annual Employer Health Benefits Survey, conducted by The Greater Milwaukee Annual Report on Health Care.
However, surveyed employers still reported an increase in health care costs of 10 to 14 percent this year.
Prior to making changes to their health benefits plans, those companies expected their health insurance costs to increase by 15 to 19 percent this year.
The survey was conducted between March and August at hctrends.com (where the results can now be viewed for free). Company presidents, chief executive officers and employee benefits professionals were asked to participate in the survey. Nearly 140 companies participated.
The cost of health care in the Milwaukee area increased this year at a similar rate to last year, according to the survey results, said Dave Jensen, editorial director for The Greater Milwaukee Annual Report on Health Care.
Increasingly, businesses are taking steps to pass more of those costs on to their employees, he said.
"It appears, in general, the companies are being as aggressive if not slightly more aggressive (in reducing health insurance costs) compared with last year," Jensen said.
Two-thirds of the increase in health care costs is the result of excessive and improper use of health care services, according to Gerald Frye, president of Waukesha-based The Benefit Services Group Inc., which is the principal sponsor for the survey.
Some area businesses are making their employees pay higher co-payments for higher levels of medical service, rather than charging the same co-pay regardless of the type of care that they receive. That places some pressure on employees to make sure they are not seeking an unnecessary level of care, such as an inappropriate visit to an emergency room, he said.
"If we want (health care) to act like a consumer good, then we have to treat it like a consumer good," Frye said.
The survey is not intended to be a statistically valid sampling of health care benefits in the Milwaukee area, Jensen said. The survey relied on voluntary responses, not random sampling techniques. Still, the survey results provide a comprehensive benchmark on employee benefits in southeastern Wisconsin, Jensen said.
"We believe the employer health benefits survey will become an indispensable tool in understanding changing trends in the region’s benefit plans," he said.
The 138 businesses participating in the survey represent about 110,000 covered individuals.
Nearly 85 percent of the surveyed companies made changes to their health plans this year to combat rising costs. The most common strategy, used by 71 percent of the surveyed companies, was increasing deductibles and/or co-payments.
About 42 percent of the surveyed companies increased their employees’ out-of-pocket maximums, and about 36 percent increased the employees’ shares of the
premiums.
By making those changes, 40 percent of the survey respondents were able to keep their projected 2004 health care cost increases below 10 percent. About 16 percent of the surveyed businesses said their costs would increase by less than 5 percent.
The Greater Milwaukee Annual Report on Health Care compared the results of its survey with an identical survey done by a sister publication in Seattle, called The Greater Puget Sound Annual Report on Health Care.
By comparison, Milwaukee businesses were more aggressive than Seattle firms in changing their health care plans to reduce costs. Health care costs are about 20 percent higher in Milwaukee than in Seattle, according to a 2002 report by Hewitt Associates, a human resources consulting firm.
The higher cost of health care in southeastern Wisconsin is likely a big reason why more businesses here are making changes to their health plans, Jensen said.
The comparison between Seattle and Milwaukee also revealed a different approach in providing health benefits to employees. Milwaukee employers in the survey pay for about 70 to 79 percent of health care costs for employees, whether they are on a family coverage plan or a single plan. The employers surveyed in Seattle, on average, cover only 60 to 69 percent of the health care costs for family plans, but they pay for 90 to 99 percent of the costs for employees with single coverage.
The Seattle approach helps companies save money because their employees are discouraged from including their spouse and children in the company’s health care plan, Jensen said.
"If you’re looking at it strictly from a cost standpoint, you’d probably be better off with the Seattle model," Jensen said. "That doesn’t mean it’s good for employee morale."
Midwestern firms traditionally have more generous benefits packages than firms on the West Coast because of a greater influence here from labor unions, Frye said. Slowly, Milwaukee area firms are requesting greater contributions for family health insurance plans, he said.
"I do see a move to charge dependents more, but I don’t see
a definite move
to the West Coast (approach),"
Frye said.
The Greater Milwaukee Annual Report on Health Care created a typical health care plan based on an average of what the survey respondents provide.
Milwaukee-area survey respondents pay an average deductible for a single employee of $300 to $400 and $600 for a family. The average maximum out-of-pocket expense for a single employee is $1,500 to $2,000 and for a family is $3,000 to $4,000. The average physician office co-pay is $20.
Some of the surveyed businesses use proactive methods to improve the health of their employees and reduce their health insurance claims and therefore lower their health insurance premiums. About 27 percent of the survey respondents have wellness programs, and 18 percent have disease management programs.
The vast majority of the survey respondents, 92 percent, offer their employees a health plan through a preferred provider organization (PPO). About 15 percent of those surveyed use a health maintenance organization (HMO). Some employers offer multiple options.
About 6 percent of the survey respondents said their company does not provide health insurance to their employees. Businesses with fewer than five employees were the most likely to not offer health insurance.
Businesses interested in participating in the 2005 employer health benefits survey can contact The Greater Milwaukee Annual Report on Health Care at: info@HCTrends.com.
of the health care burdenOctober 15, 2004, Small Business Times, Milwaukee, WI