This doesn't mean employers are rushing to get out of paying for health care. Paul Fronstin, senior research associate at EBRI, says, "There's no evidence that a huge percentage of employers are passing along the costs to employees. They've been saying they're going to do that for years, but it hasn't materialized."
John Erb, senior manager for Deloitte & Touche, agrees. "Despite a rising unemployment rate, we're finding that most employers are still coping with a tight job market and, as a result, are making few changes in their benefit programs during this economic downturn," he says. "That being said, many employers are looking to do some cost-cutting in their medical plans, where costs have risen rapidly over the past three years. They are accomplishing savings by increasing employee contributions for the plans and by raising employee cost-sharing requirements (copayments, deductibles)."
Those increases weren't happening in the late 1990s; in fact, employees paid only 14 percent of their premiums in 2000, down from 21 percent in 1996 for single coverage. It's too soon to tell -- employers generally set this year's premiums in 2000 -- but the pendulum may be swinging back.
It is at Fosdick Fulfillment Corporation in Connecticut. Like many of his colleagues, HR director Jim Carabetta was staring at health-care increases in the mid-teens. Rather than trading down to a poorer health plan, which wouldn't be accepted at as many places statewide (and for out-of-state emergencies), the company will absorb much of the cost itself, and pass on a portion of the insurance premium increases
to the 135 to 140 employees.
At Fosdick, the low end of the pay spectrum will see the smallest effect. "We've reallocated the 'weight' of the insurance nut and put more toward our hourly employees, figuring the high end of the spectrum is in a better position to absorb the increases," Carabetta says.
Fosdick still absorbs more than 75 percent of the premium bill, but the hourly enrollee would see a $4 increase weekly, and the manager would see over $9.
Some employers are coupling cuts in health benefits with increases elsewhere to offset the hardship on employees. An integrated-health-care organization in Montana made a potpourri of cuts to the coverage it provides its employees, including:
Reducing the coverage it was offering employees, who are nurses and other health-care professionals. Reductions hit a variety of preventive screenings, such as women's and children's exams.
Increasing deductibles. Depending on the type of plan the employee chose for coverage, the deductibles were doubled (from $250 to $500, or $500 to $1,000), and annual out-of-pocket maximums were increased as well.
Increasing premiums. Employees -- and the organization -- saw 20 percent increases in their premiums.
Asking part-timers to pay. The company asked part-timers to pay an additional premium amount if they wanted the same level of benefits as full-time employees. A part-time employee pays an additional $20 per month for plan coverage.
Changing prescription-drug coverage. Employees now incur a higher out-of-pocket copayment amount depending on whether the drug is generic or a brand name.
The compensation representative for the company says this wasn't fun. "Increases in insurance premiums also associated with decreased benefits are not taken lightly. There are no easy words to communicate these hard decisions."
Robert J. Christadore, CEO of Benefits Alliance, a 90-member California employer consortium, says that shifts toward greater employee contributions similar to the above examples are indeed the wave of the future. "The early movers are moving," he says, "and the followers are following. You'll see more and more followers over the next 12 months."
To ease the pain of the cuts, the Montana health-care company made increases to its education/tuition-reimbursement program, particularly for hard-to-fill positions.
The firm expanded the program from a lifetime maximum of $5,000 to include an additional $5,000 for employees with 10 years of service or more. These dollars can be spent on education at any accredited university or technical school, and the employee must receive a passing grade to receive reimbursement. It also added a tuition-loan repayment program to newly hired employees for hard-to recruit positions. These positions are defined at the beginning of each year. New hires who meet the eligibility criteria in these jobs would be eligible to receive up to a maximum of $5,000.
Finally, the company is offering certification exam reimbursement. For employees who wish to pursue certifications pertinent to their area of work, they pay a one-time reimbursement for the cost of obtaining the certification as approved by the manager. If you work in oncology, you could get approval to become a certified oncology nurse and the company would pay the cost of exam/test fees. This program does not include certifications required as part of the minimum qualifications for a job.
- Aon Consulting/Radford Division
- Benchmark Compensation Report.
- Watson Wyatt
- Several compensation and health reports.
- Employee Benefits Research Institute
- Several reports on health and other benefits.
Workforce, September 2001, pp. 40-42 -- Subscribe Now!