Three surveys unveiled last week indicate that the growth in employer healthcare costs is slowing, but only because companies are cutting benefits, making employees pay more or dropping coverage completely.
In one survey concerning historical healthcare costs -- conducted by the Kaiser Family Foundation and the Health Research & Educational Trust -- researchers found that premiums increased 9.2% in 2005, down from 11.2% in 2004.
Two others surveyed businesses about future healthcare costs. In preliminary findings by Mercer Human Resource Consulting and Marsh Benefits, employers said they expect their healthcare costs to increase by 6.4% in 2006. Actual cost increases for 2005 had not yet been determined, but in 2004 employers said their costs rose 7.5%. And business leaders responding to a Robert Wood Johnson Foundation survey said they expect their 2006 healthcare costs to increase by 12%, down from 18% growth two years ago.
But in each survey, businesses also said that they were able to ease healthcare cost increases at the expense of their workers. In the Mercer survey, respondents said that without making changes to their health benefits, such as shifting costs to employees, their own costs would increase by almost 10% in 2006. And according to the Kaiser survey, the percentage of employers with three or more employees offering health insurance to workers dropped to 60% this year from 63% in 2004 and 69% in 2000.
On the heels of last month's U.S. Census Bureau figures showing the number of uninsured Americans rose in 2004, last week's survey results could signal a continued uptick in that trend, said Ed Howard, executive vice president of the Alliance for Health Reform, a nonpartisan Washington think tank. In 2004, 45.8 million Americans went without health coverage, up 1.8% from 45 million in 2003.
Indeed, the census findings suggested that the number of uninsured would have gone even higher had it not been for government insurance programs such as Medicaid. In 2004, 59.8% of Americans were insured by their employers, down from 60.4% in 2003. That was offset by an increase in the rate of Americans covered by government health insurance programs. In 2004, 27.2% of Americans were in such programs, up from 26.6% the year before.
One finding by Kaiser researchers pointed to the importance of such public programs. The survey found that the drop in coverage among employers came almost completely from the small-business sector, where wages are typically lower. Among employers with fewer than 200 workers, 59% offered health insurance this year, down from 68% in 2000. By comparison, 98% of large employers offered health insurance in 2005, statistically unchanged from 2000 when 99% of large employers offered health benefits.
"It is the low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health system," said Drew Altman, president and chief executive officer of the Kaiser Family Foundation.
But with Congress preparing legislation to cut perhaps $10 billion from Medicaid, opponents of the cuts say states may have to shrink their Medicaid rolls, threatening to increase the number of uninsured.
And while the growth rate for costs is slowing, Howard said the fact that it continues to outpace wage growth and inflation is alarming. The 9.2% growth rate in premiums found by Kaiser represents the third consecutive year that growth has slowed and marked the first time since 2000 that growth did not reach double digits. Yet it still was more than three times the growth in workers' wages, 2.7%, and more than double the growth in overall inflation, 3.5%.
"If you extend those trends over 20 years, we're all going to be working in hospital parking lots," Howard said.
Altman warned the slowdown in the growth rate could be short-lived. "History has told us that when it comes to controlling healthcare costs, we've achieved some temporary successes, but the rate of increase always bounces back."
For businesses, solutions to rising healthcare costs have been hard to come by and many have had to shift costs to employees. The Mercer survey found that 62% of employers said they were trying to hold down their healthcare costs by making workers pay more.
"We're seeing a new willingness on the part of employers -- born of desperation -- to shift cost in successive years to achieve acceptable cost increases," said Blaine Bos, Mercer's Minneapolis office leader for health and group benefits, in a news release.
According to the Robert Wood Johnson Foundation survey, among the kinds of changes businesses favor are allowing small businesses to band together to purchase health insurance, providing tax credits to small businesses to help them purchase insurance for employees and increasing federal funding to community health centers to provide more care for people with limited access to healthcare services.