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Health Care Reform: Employees Face Greater Cost-Sharing

By Karen Pallarito
HealthDay Reporter

THURSDAY, Sept. 9 (HealthDay News) -- Americans who have health insurance through large, employer-sponsored health plans will see a number of plan design changes in 2011, and they'll be paying more for that coverage, employers and benefits consultants say.

"You're going to see higher premiums and higher contributions from the individual members of the plan," said Ronald Bachman, president and CEO of Healthcare Visions, an Atlanta-based consulting firm.

"Health-care reform doesn't change the fact that costs are going up, and cost-shifting is going to continue to occur between the employer's portion of the cost and the individual's portion of costs," he said.

Employer-sponsored health plans cover 159 million people, or 52 percent, of all Americans, according to an analysis by the Kaiser Commission on Medicaid and the Uninsured and the Urban Institute.

Employers project that health-care costs will rise 8.9 percent, on average, in 2011, according to a report released last month by the National Business Group on Health (NBGH). This year, the average increase was 7 percent.

Sixty-three percent of employers intend to increase employees' share of premium costs, compared with 57 percent who did so this year, the survey found, while 46 percent plan to raise out-of-pocket maximums, up from 36 percent this year.

More than six in 10 employers in 2011 will offer a consumer-directed health plan, a type of coverage that combines a high-deductible health plan with a health savings account, or HSA. (An HSA allows consumers to pay for medical expenses with tax-free dollars.) The number of employers that intend to offer this type of consumer-directed plan exclusively -- replacing other health-plan options -- doubled from 10 percent this year to 20 percent in 2011.

"We fully expect interest in CDHPs (consumer-directed health plans), and especially full-replacement plans, will continue to increase in the future," Helen Darling, president of the National Business Group on Health, said in a news release.

The NBGH survey, based on responses from 72 of the nation's largest corporations, indicates that more than half of employers are moving ahead with changes to their benefit plans despite some uncertainty about how new regulations implementing health reform will affect existing health plans.

The rising cost of health benefits is partly due to the cost of implementing various health-reform requirements.

One in four employers says that complying with health reform will boost 2011 health-plan costs by 3 percent or more, according to Mercer L.L.C., an employee benefits consulting firm. About 40 percent of the 791 employers surveyed by Mercer believe health reform will have a more modest impact, raising plan costs by 2 percent or less.

Employee premiums, deductibles and co-payments or co-insurance can differ widely from one job-based plan to another. Even the array of covered benefits may differ from one employer to another.

"If you think of all the summary plan descriptions and the benefits booklets that describe what the employer coverage looks like, and if you put those on top of one another, they'd probably be taller than the Empire State Building," said Bill Rosenberg, director of the global human resource solutions group of PricewaterhouseCoopers in New York City.

Health reform will ensure that all health plans -- even existing employer-sponsored plans -- offer certain protections to their members. If your health plan has a lifetime dollar limit on essential benefits, for example, that will disappear. If your employer offers coverage of dependents, but only up to, say, age 19, it must extend eligibility to young adults under the age of 26.

Health plans that have been in place since the health reform law passed in March may be "grandfathered" -- or exempt -- from other requirements, such as covering recommended preventive services without cost-sharing.

While grandfathered health plans are allowed to make small tweaks in benefits and costs, they cannot change insurance carriers, slash coverage, hike co-payments or shrink the employer's share of the premium.

"Let's say the employer pays 70 percent of the cost of the plan and the employee pays 30 percent," Rosenberg explained. "The employer may reduce its share by up to 5 percent. But beyond that, they're not allowed."

However, survey results released last month suggest that employers don't want to be hemmed in by those limits. Ninety percent of U.S. companies expect to lose their grandfathered status by 2014 -- a majority in the next two years, according to the benefits consulting firm Hewitt Associates.

"Whether or not you're going to see a cost increase and the extent to which you will have a cost increase will depend on what your coverage was before health-care reform," added Chantel Sheaks, a principal with the benefits consulting firm Buck Consultants in Washington, D.C. While people in more generous health plans may experience less of an increase, "everyone will be paying for this," she said.

More information

The Kaiser Family Foundation has more on employer-sponsored health insurance.

To read the first part of the series click here.

To read the second part of the series click here.

SOURCES: Ronald Bachman, president and CEO, Healthcare Visions, Atlanta; Bill Rosenberg, director, global human resource solutions group, PricewaterhouseCoopers, New York City; Chantel Sheaks, J.D., principal, Buck Consultants, Washington, D.C.; National Business Group on Health, Aug. 18, 2010, news release and report; Mercer L.L.C., May 20, 2010, news release; Kaiser Commission on Medicaid and the Uninsured and the Urban Institute; Hewitt Associates, Aug. 10, 2010, news release

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