Employers may be seeing their healthcare premium costs stabilize, but that's only half the story. Their employees are shouldering a growing portion of the healthcare cost burden.
According to a U.S. Labor Department report, not only must a far greater number of employees contribute to their health insurance premiums, but they're paying more of the total bill.
At the same time, the percentage of full-time employees participating in employer-sponsored health plans has declined significantly, to 82% in 1993 from 96% in 1983. That figure covers companies with more than 100 workers; small employers are not included.
HCFA estimates that employees paid 16% of the premiums for employer-sponsored plans in 1994, vs. 13.7% in 1987. If the employer share had remained the same as in 1987, employees' would have paid $5.5 billion less.
That burden has fallen particularly hard on workers who need family coverage. A worker taking family coverage in 1983 typically contributed $45 toward the premium; by 1993 that worker was paying $107, in constant 1993 dollars. Those figures are continuing to rise. A KPMG Peat Marwick study found that the employee share of family premiums rose to 31% in 1995 from 23% in 1994.
The Labor Department gathered the information to understand why employers' healthcare costs have stopped rising. Since steep increases in the late 1980s, the growth in employers' insurance costs has dwindled to zero in 1996. Wages and salaries and overall benefit costs now are rising much faster than healthcare costs.
In the 12 months ended June 30, 1996, employer health insurance costs increased by a scant 0.1%, not adjusting for inflation. In the year ended June 30, 1995, they rose 0.6%, and in the year ended June 30, 1994, they rose 5%.
The report identifies several reasons for the trend:
The rise in healthcare costs slowed. In the six months ended June 30, 1996, medical prices grew more slowly than nonmedical prices.
Employers switched to managed-care plans, which have lower premiums and control costs better. A Foster Higgins survey showed that in 1995 the total average premium for an employee in an HMO was $804 less than for a traditional indemnity plan.
Fewer employees receive health benefits. In 1989, 92% of employees in medium and large companies participated in the company health plan. By 1993 that had dropped to 82%. In small companies, the participation is much lower. Increasingly, low-wage workers are opting out of insurance coverage. Service workers tend not to be eligible for employer coverage. Also, many employers are declining to offer health plans.
Utilization of services has decreased.
Employees are paying a greater share of the total costs.
The Labor Department report concludes that one cost is not accounted for: "the opportunity cost of time spent by beneficiaries as they weave through the maze of gatekeepers and precertification required for specialized procedures in managed-care plans."