With private healthcare insurance premiums continuing to rise at a double-digit pace, one of the ways employers are looking to defray costs is by making workers pay more out of pocket for inpatient hospital care, according to a report released last week.
The report by the Kaiser Family Foundation, Menlo Park, Calif., and the Health Research and Educational Trust, Chicago, pegged the rise in premiums for 2003 at 13.9%, up from 12.9% for 2002. In addition to being the third consecutive year that premiums have risen in double-digit percentages, the figure marked the highest annual jump since 1990, when premiums increased 14%.
Although researchers found that employers are trying their best to keep the level of benefits the same and eat up as much of the premium increases as they can, the report also said workers have had to pay more in deductibles and copayments.
The trend has been best documented with prescription drug costs-where the average copay for a nonpreferred drug is $29 this year, up from $17 in 2000, according to the survey. Researchers also found the cost-containing strategy showing up in benefits for hospital care.
According to the report, 36% of all employees this year with job-based insurance had to pay a separate deductible or copay that averaged $202 per hospital stay when admitted to the hospital. Another 12% had to pay coinsurance when hospitalized at an average coinsurance rate of 16%. Researchers could not compare the figures with previous years, "most likely because these (strategies) are a recent phenomenon in employer-sponsored plans," according to the Kaiser report.
Comparing the trend with Medicare, which has traditionally made its beneficiaries pay separate deductibles and coinsurance for inpatient hospital services, Jon Gabel, vice president of health systems studies at the trust, said, "Employers have chosen to go back to the future."
Another report released last week, by the Corporate Research Group, New Rochelle, N.Y., predicted that workers would see another hit to their pocketbooks next year as employers try to get a handle on healthcare costs.
The group report projected the increase in premiums for managed-care plans at 13% for 2004. The jump is lower than the 15.5% increase this year and the 15% jump in 2002, because of an easing in medical costs, but "Draconian cuts in healthcare benefits and increased out-of-pocket expenses for employees will be the big news over the next year as businesses struggle and maintain profits," said group President Carl Mercurio in a written statement.
The move to make consumers carry a greater share of their hospital bills comes amid recent reports that have cast rising hospital costs as the main culprit in surging overall healthcare costs. In June, the Center for Studying Health System Change reported inpatient and outpatient hospital services accounted for 51% of the overall growth in healthcare costs in 2002 (June 16, p. 8). The CMS also has cited hospital costs as the main driver of rising overall healthcare spending, accounting for 27.1% of the total healthcare cost increase in 2002 (Feb. 10, p. 16).
Helen Darling, president of the Washington Business Group on Health, which represents about 175 large employers, said more companies are likely to make workers pay coinsurance for hospital services. More so than copays and deductibles, such a strategy causes consumers to look at the real cost of healthcare and has the potential to make them curb their healthcare spending.
"It will present greater challenges to discretionary services" at hospitals, such as elective procedures, she said.
To offset rising hospital costs, health plans in recent years have looked at a variety of ways to make consumers pay more for hospital services. In California, PacifiCare Health Systems in late 2001 became the first insurer to offer "tiered" plans that gave enrollees incentives to go to hospitals that charged less for services, prompting other health plans to do the same. In tiered networks, consumers who wanted to use more expensive facilities were charged higher copays.
In some cases, though, hospitals reacted vehemently against the strategy and one plan, Blue Cross of California, dropped its tiered product after providers in that state dropped the health plan.
Mohit Ghose, spokesman for the American Association of Health Plans, said insurers are reacting to market forces. "Our members are trying to provide employers as many different product lines as possible to help them keep their healthcare costs down," he said.
The report does not look at whether workers are opting out of their employer-based plans as they have to shoulder more of the costs. Another report coming out this week by the Urban Institute, a not-for-profit think tank, however, said that may be happening. The percentage of eligible adults with employer-based coverage dropped to 70.5% in 2002 from 72.2% in 1999, according to the report, while government-sponsored coverage rose to 5.7% of the population from 4.7%.
The report also said the number of uninsured adult Americans rose to 29.1 million in 2002, an increase of 2 million since 1999, though the uninsured rate remained stable at 17%. Another 7.8 million children don't have insurance, according to the Urban Institute. The Census Bureau reports that 41 million Americans were uninsured in 2001.