Employer-Sponsored Health Insurance: Down but Not Out
Frustrated with Inability to Control Costs, Employers Shift Costs to Workers
Oct. 27, 2011
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, DCRising costs and the lingering fallout from the great recession are altering the calculus of employer approaches to offering health benefits, according to a study released today by the Center for Studying Health System Change (HSC).
Employers responded to the economic downturn by continuing to shift health care costs to employees, with the trend more pronounced in small, mid-sized and low-wage firms, according to the study coauthored by HSC Senior Consulting Researcher Jon B. Christianson, Ph.D., of the University of Minnesota; HSC Senior Researcher Ha T. Tu, M.P.A.; and Divya R. Samuel, an HSC research assistant.
At the same time, employers and health plans are frustrated with their inability to influence medical cost trends by controlling utilization of medical services or negotiating more-favorable provider contracts, the study found.
“Some believed that patient cost sharing had reached a saturation point and that employers would have to find alternatives to moderate premium increases,” said HSC President Paul B. Ginsburg. “The recession and sluggish recovery changed those views, and employers continued to pass more costs along to employees.”
The study’s findings are detailed in a new HSC Issue Brief—Employer-Sponsored Health Insurance: Down but Not Out—available online at www.hschange.org/CONTENT/1251/. The study, funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform, is based on HSC’s 2010 site visits to 12 nationally representative metropolitan communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in these markets since 1996.
In an alternative attempt to control costs, employers increasingly are turning to wellness programs, although the payoff remains unclear. Employer uncertainty about how national reform will affect their health benefits programs suggests they are likely to continue their current course in the near term, according to the study. Looking toward 2014 when many reform provisions take effect, employer responses likely will vary across communities, reflecting differences in state approaches to reform implementation, such as insurance exchange design, and local labor market conditions. Other key findings include:
- Cost pressures helped spur adoption of consumer-driven health plans (CDHPs)—high-deductible plans typically paired with a savings account. Across the 12 communities, CDHP enrollment grew from a negligible base to become a significant portion of small-group enrollment and a modest portion of overall commercial enrollment.
- To date, health plan approaches to limiting provider networks—narrow networks and tiered networks—have not gained much traction with large employers. Narrow-network products exclude nonpreferred providers from the network altogether, while tiered-network products place these providers in tiers requiring higher cost sharing at the point of service. However, in some communities, limited-network products made headway in the small-group market, where employers are more cost conscious.
- As small businesses struggled with high and rising premiums during the recession, health plans in most markets rolled out limited-benefit, lower-premium products, typically marketed as “value plans” in the small-group market. In Greenville, Indianapolis and Phoenix, among other markets, plan products feature a fixed number of physician office visits for a fixed copayment amount; additional office visits and other services are subject to a deductible and a high rate of coinsurance.
- In response to employers’ ongoing reluctance to antagonize employees, health plans in recent years refrained from stringent across-the-board utilization management, such as prior authorization and retrospective review of services. In some cases, plans also cited lack of evidence of return on investment and a desire not to provoke providers. Instead, plans focused utilization management on select high-cost and/or preference-sensitive services with substantial variation in provider-practice patterns—services such as imaging and treatment of low-back pain.
- The incorporation of health promotion and wellness components into employee benefits programs is growing, spreading from large, self-insured employers to even small groups. Nearly all commercial health insurance products include some basic wellness features built into the premium—a health risk assessment at a minimum and often additional Web-based wellness tools—with supplemental programs available for additional fees.
The Center for Studying Health System Change is a nonpartisan policy research
organization committed to providing objective and timely research on the nations
changing health system to help inform policy makers and contribute to better
health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.