Archive | Employers Reaction to Bill

Survey shows California healthcare costs rising, benefits shrinking

By Marc Lifsher, Los Angeles Times

January 4, 2012.

Fewer California companies offered their workers health insurance last year, and the ones that did charged employees more for their coverage.

That’s among the findings of an annual California Employer Health Benefits Survey released Wednesday by the California HealthCare Foundation, a research and grant-making nonprofit organization.

According to the survey, premiums for employer health insurance plans have risen 153.5% since 2002, a rate that’s more than five times the increase in California’s inflation rate.

In the last two years alone, the proportion of state employers offering coverage to workers fell to 63% from 73%, the survey said.

“This is a departure from previous years and could be an early sign of future changes,” the foundation report noted in commentary on data collected between July and October 2011 in interviews with 770 private firm benefit managers.

The steady rise in costs during a prolonged economic downturn contributed to decisions by about a quarter of employers to either reduce benefits or increase cost sharing for employees in 2011. A slightly smaller percentage, 22%, opted to make workers pay more of the share of the higher premiums.

Health insurance is expected to take even more money out of workers’ pockets this year. The survey indicated that 36% of California firms said they were either “very” or somewhat” likely to raise the amount that their staff paid in premiums in 2012.

Rising costs and shrinking coverage are accelerating, said Anthony Wright, executive director of Health Access California, a group that advocates for expanded health insurance coverage.

“They are frankly multi-decade trends,” he said. “What is notable is that this is more significant than usual.”

What’s been a “gradual erosion of employer-based coverage in good years” has evolved into “a steep one in bad years,” Wright said. “To be down to 63% [of California companies offering coverage] is huge. It used to be up over 80%.”

Patrick Johnston, president of the California Assn. of Health Plans, blamed the rising premiums on expensive technology, the spread of chronic disease and an aging population, among other factors. Johnston’s organization represents 40 California health plans that cover 21 million people.

What’s more, he noted that years of cutting reimbursements to doctors and hospitals by the government-run Medi-Cal program have created a “cost shift” that has to be “made up in negotiations for higher rates for commercial payers such as employers.”

Insurer profits, Johnston argued, are not a leading cost driver since publicly traded California insurers keep only 13 cents out of every premium dollar to pay for expenses and to secure earnings that average 3% to 5% of revenue.

Both Wright and Johnston predicted that full implementation of President Obama’s healthcare reform plan in 2014 could go a long way toward broadening coverage and to an eventual control of raging medical cost inflation.

“I hope that some of the reforms start to change the picture,” Wright said. “It’s clear that if we repeal [the law] or retreat back to the status quo, we will have some trends that simply are unsustainable.”

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Every Small Business Needs to Know About These Potential Regulatory Changes

Paychex Inc. released its list of the top 12 potential regulatory changes that small businesses need to know about in 2012. Paychex works closely with the IRS and other government agencies and is constantly monitoring regulatory and compliance-related matters.

• Health Coverage W2 – The IRS further delayed a requirement for smaller employers to report the cost of employer-sponsored health coverage on employee Forms W-2, indefinitely postponing it until further guidance is issued. However, employers that file 250 or more Forms W-2 in 2011 must include this cost on the W-2 starting in tax year 2012. The healthcare amounts reported on the W-2 will be strictly informational and not taxable to the employee.

• Healthcare Reform – The Supreme Court is expected to rule in 2012 on the constitutionality of the individual mandate provision in the Affordable Care Act.

• 401(k) – In 2012, 401(k) service providers will have to make additional fee disclosures to plan sponsors and plan sponsors will have to make additional fee disclosures to participants. Contribution limits will increase in 2012. Regulations will be enacted in 2012 or are under consideration to broaden the definition of a plan fiduciary, make investment advice more accessible to plan participants, and restrict the number of loans an employee can take from their 401(k).

• Job Creation – Congress passed legislation in 2011 to provide a tax credit for hiring veterans. The temporary reduction of employee payroll taxes was due to expire on December 31, 2011, but Congress extended the provision for two more months. A new recapture provision applies to employees who earn more than $18,350 during the two-month period.  The tax cut could extend through 2012, pending further negotiations. Congress is considering additional measures, such as earmarking funding for infrastructure projects and passing measures to help small businesses access capital.

• Worker Classification – IRS is allowing eligible employers to reclassify workers as employees in exchange for partial tax relief from past federal employment taxes. In late 2011, the Dept. of Labor agreed to work with the IRS and several states to coordinate enforcement. Legislation in several states to increase fines for worker misclassification may affect employers in 2012.

• Deficit Reduction – Proposed legislation focuses on reducing the deficit through spending reductions and tax increases. Many of the ideas involve reforming personal and business tax and closing of tax loopholes.

• Immigration – The federal government is conducting rigorous worksite enforcement and paperwork inspections of companies of all sizes to crack down on the employment of illegal immigrants. In 2012, state laws will require more private sector employers to use the federal E-verify system for employee verification. Also possible in 2012 are Congressional immigration reform proposals that may include additional federal employment verification obligations.

• Employment Law – Many states restrict employers from using an employee’s credit information in employment-related decisions or are considering these resrictions. The Dept. of Labor and many states have enacted or are considering regulations to provide greater transparency of pay checks. These regulations focus on how workers’ pay is calculated, especially as it relates to minimum wage and overtime requirements.

• Security and Privacy – Cybercrime and corporate bank account takeovers against small businesses are becoming more widespread. Employers should take security precautions, such as using stand-alone computers for online banking; not clicking on attachments or hyperlinks from unknown sources; and working with their bank to implement fraud detection tools on their accounts. Many states have enacted onerous privacy and security breach regulations.

• Dodd-Frank – The sweeping Dodd-Frank financial law is focused primarily on Wall Street reforms and consumer protection. However small businesses may face limited access to credit and higher costs of credit or other financial services because of the increased burden it places on some industries.

• Unemployment Insurance – Virtually all businesses will face higher unemployment insurance taxes if Congress reinstates the federal unemployment surtax. In many states, employers will see higher taxes because of the repayment of outstanding federal loans that were taken to continue paying benefits and replenish depleted state unemployment trust funds. Many states are cosidering additional employer reporting requirements to combat unemployment insurance fraud.

• Taxes – 2012 will bring a number of important tax changes including a higher Social Security wage base and changes to  assistance benefit limits. The accelerated depreciation benefits, which were in place in 2011, may expire or be scaled back in 2012. All employers will need to keep an eye on what are likely to be additional tax changes as the year progresses.

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Early Retiree Program to Employers: Bye

Officials at the Centers for Medicare and Medicaid Services (CMS) were right back in April when they predicted they would probably use up Early Retiree Reinsurance Program (ERRP) funding early.

CMS stopped taking ERRP applications in May because of concerns about lack of availability of funds, and now officials say in a new notice that ERRP probably will stop helping with claims incurred by the employers already using the program at the end of the year.

The drafters of the Patient Protection and Affordable Care Act  of 2010 (PPACA) created ERRP and provided $5 billion in ERRP funding in an effort to help the dwindling number of employers that still provide health coverage for retirees ages 50 to 64.

ERRP, which began taking applications in June 2010, has been reimbursing participating employers for 80% of the amount of claims costing between $15,000 and $90,000 for early retirees and early retirees’ spouses, surviving spouses and dependents.

The ERRP creators supporters were hoping ERRP would help keep coverage in place for early retirees until 2014. Early retirees cannot get Medicare coverage unless they qualify for Social Security Disability Insurance benefits, and, in states that allow medical underwriting, early retirees with health problems may have trouble qualifying for conventional commercial health coverage.

If PPACA provisions take effect as written and work as backers hope, carriers will still be able to charge older consumers more than they charge younger consumers in 2014, but they will not be able to use an individual’s health status when deciding whether to issue coverage or when setting rates.

Unless Congress provides additional funding, ERRP likely will end 2 years earlier than hoped, because the program already has spent $4.5 billion of its funding, CMS officials say.

Plan sponsors must not mix claims incurred after Dec. 31, 2011, with 2011 claims in ERRP reimbursement requests, officials say.

If circumstances change, and more funding surfaces, CMS may announce that it can help with some 2012 claims, officials say.

“If a claim is incurred on or before December 31, 2011, but paid after December 31, 2011, the sponsor may submit the claim, but not until it has been paid,” officials say.

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Choking on Obamacare

By George F. Will, Published: December 2

In 1941, Carl Karcher was a 24-year-old truck driver for a bakery. Impressed by the large numbers of buns he was delivering, he scrounged up $326 to buy a hot dog cart across from a Goodyear plant. And the war came.

so did millions of defense industry workers and their cars. And, soon, Southern California’s contribution to American cuisine — fast food. Including, eventually, hundreds of Carl’s Jr. restaurants. Karcher died in 2008, but his legacy, CKE Restaurants, survives. It would thrive, says CEO Andy Puzder, but for government’s comprehensive campaign against job creation.

CKE, with more than 3,200 restaurants (Carl’s Jr. and Hardee’s), has created 70,000 jobs, 21,000 directly and 49,000 with franchisees. The growth of those numbers will be inhibited by — among many government measures — Obama­care.

When CKE’s health-care advisers, citing Obamacare’s complexities, opacities and uncertainties, said that it would add between $7.3 million and $35.1 million to the company’s $12 million health-care costs in 2010, Puzder said: I need a number I can plan with. They guessed $18 million — twice what CKE spent last year building new restaurants. Obamacare must mean fewer restaurants.

And therefore fewer jobs. Each restaurant creates, on average, 25 jobs — and as much as 3.5 times that number of jobs in the community. (CKE spends about $1 billion a year on food and paper products, $175 million on advertising, $33 million on maintenance, etc.)

Puzder laughs about the liberal theory that businesses are not investing because they want to “punish Obama.” Rising health-care costs are, he says, just one uncertainty inhibiting expansion. Others are government policies raising fuel costs, which infect everything from air conditioning to the cost (including deliveries) of supplies, and the threat that the National Labor Relations Board will use regulations to impose something like “card check” in place of secret-ballot unionization elections.

CKE has about 720 California restaurants, in which 84 percent of the managers are minorities and 67 percent are women. CKE has, however, all but stopped building restaurants in this state because approvals and permits for establishing them can take up to two years, compared to as little as six weeks in Texas, and the cost to build one is $100,000 more than in Texas, where CKE is planning to open 300 new restaurants this decade.

CKE restaurants have 95 percent employee turnover in a year — not bad in this industry — and the health-care benefits under CKE’s current “mini-med” plans are capped in a way that makes them illegal under Obamacare. So CKE will have to convert many full-time employees to part-timers to limit the growth of its burdens under Obamacare.

In an economic climate of increasing uncertainties, Puzder says, one certainty is that many businesses now marginally profitable will disappear when Obamacare causes that margin to disappear. A second certainty is that “employers everywhere will be looking to reduce labor content in their business models as Obamacare makes employees unambiguously more expensive.”

According to the U.S. Small Business Administration, by 2008 the cost of federal regulations had reached $1.75 trillion. That was 14 percent of national income unavailable for job-creating investments. And that was more than 11,000 regulations ago.

Seventy years ago, the local health department complained that Karcher’s hot dog cart had no restroom facilities. He got help from a nearby gas station. A state agency made him pay $15 for workers’ compensation insurance. Another agency said that he owed more than the $326 cost of the cart in back sales taxes. For $100, a lawyer successfully argued that Karcher did not because his customers ate their hot dogs off the premises.

Time was, American businesses could surmount such regulatory officiousness. But government’s metabolic urge to boss people around has grown exponentially and today CKE’s California restaurants are governed by 57 categories of regulations. One compels employees and even managers to take breaks during the busiest hours, lest one of California’s 200,000 lawyers comes trolling for business at the expense of business.

Barack Obama has written that during his very brief sojourn in the private sector he felt like “a spy behind enemy lines.” Puzder knows what it feels like when gargantuan government is composed of multitudes of regulators who regard business as the enemy. And 22.9 million Americans who are unemployed, underemployed or too discouraged to look for employment know what it feels like to be collateral damage in the regulatory state’s war on business.

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IRS warned healthcare law could leave millions without insurance

By Julian Pecquet – 11/17/11 03:38 PM ET

President Obama’s healthcare law will leave millions of families without affordable coverage unless tax officials rewrite the rules on who gets subsidies, advocates warned Thursday.

A dozen consumer advocacy groups urged the Internal Revenue Service to allow workers’ spouses and dependents to qualify for tax credits if employer-sponsored family plans are unaffordable. The Treasury Department in August released proposed regulations that grant subsidies to workers and their families in cases when employer coverage costs too much for the employee only, but not when family coverage is out of reach.

The issue risks blowing up in Democrats’ face in 2014, when the subsidies for coverage in state-based insurance exchanges become available. House Republicans have already used the glitch, which The Hill first reported in July, as ammunition to hammer the law for allegedly discriminating against marriage.

Advocates shared their concerns in person with the IRS during a hearing on the tax credits after deluging the agency with comments about its proposed regulation last month. The proposed rule would not penalize families that can’t afford insurance, but advocates say that’s not enough.

“It’s not sufficient not to penalize families — what we want to do is make insurance affordable and get them into coverage,” said Lynn Quincy, senior policy analyst with Consumers Union.

IRS officials listened silently for two and a half hours and asked no questions. The Treasury Department has said its hands are tied because of the way the law was written.

Advocates weren’t having it.

Criticism of the proposed rule, said SEIU healthcare policy coordinator Dania Palanker, “occurred because (it) is in contradiction with the intent of the law.”

Advocates said repeatedly that the Treasury Department has the authority to change the law, as outlined in comments from the liberal Center on Budget and Policy Priorities.

And they downplayed the cost of fixing the problem, citing a new UC-Berkeley micro-simulation study that concludes it would cost much less than the $50 billion a year suggested in an earlier, less thorough study.

“The legal analysis should be enough to make the case,” CBPP Vice President for Health Policy Judith Solomon told The Hill, “but there’s that looming cost issue.”

Advocates also urged the IRS to strengthen the definition of the minimum value requirement for employer-sponsored healthcare plans. The law requires employers to offer plans that cover at least 60 percent of the cost of the benefit or face a penalty.

The SEIU’s Palanker said the law however doesn’t define what those benefits should be, creating a “huge backdoor” for employers to continue offering sub-par coverage that the law seeks to eliminate. She called for employer benefits to be indexed to the government-regulated plans that will be offered on the state insurance exchanges.

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Temp Agencies: PPACA Employer Mandate a Bad Fit

October 6, 2011 By Allison Bell

 

Staffing industry representatives are asking Congress to exempt temporary workers from employer health insurance requirements set to take effect in 2014 or at least lighten the load.

The witnesses appeared today at a hearing on the effects of the employer penalty provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) on temporary workers and their employers.

The hearing was organized by the U.S. House Government Affairs and Oversight Committee health subcommittee.

The PPACA employer mandate provision will require employers classified by the government as “large” to offer comprehensive health coverage to permanent, full-time employees starting in 2014 or else pay a penalty.

Employers that offer group health coverage could still end up paying a penalty if the employee’s share of the premiums for the lowest-priced individual plan available exceeds 9.5% of the employee’s income. The Internal Revenue Service has proposed that an employer could assume that the compensation it will be reporting on a worker’s Form W-2 is that employee’s income for health coverage affordability calculation purposes.

Christopher Spiro, managing director for health policy at the Center for American Progress Action Fund, Washington, an organization that supports PPACA, says PPACA and the federal agencies implementing it are trying to be as practical and flexible as possible when implementing provisions that would affect temporary workers and the temps’ employers.

The provision applies only to employers with 50 or more full-time employees, and that means 96% of employers will be exempt, Spiro said in written testimony posted on the committee website.

The provision also exempts seasonal workers and workers who work less than 30 hours per week, and an employer can calculate a worker’s hours either month by month or, in a procedure proposed by the U.S. Treasury Department, by using an average calculated using a look-back period of up to 12 months, Spiro said.

But, any method created to ease employers’ burden “must not undermine the purpose of employer responsibility,” Spiro said. “The method must not create an incentive to convert permanent full-time employees into temporary workers.”

Edward Lenz, a senior vice president at the American Staffing Association, Alexandria, Va., praised the Treasury Department’s look-back proposal but would prefer to see temporary workers exempted from “offer of coverage requirements” altogether.

Otherwise, a staffing firm could end up having to make “double payments” and have a strong incentive to stop offering coverage to any employees, Lenz said.

Many temporary workers have coverage from other sources, and they likely would end up with more stable arrangements, such as consistently owned “mini med” plans, or individual coverage purchased through the new health insurance exchanges that are supposed to be created by PPACA, if they do not move in and out of the staffing company’s plan, Lenz said.

John Uprichard, president of Find Great People International Inc., Greenville, S.C., testified that his firm – which has 50 internal employees, a pool of about 375 to 400 temporary workers, an internal annual payroll of $2.9 million, and an annual temporary worker payroll of about $7.4 million – believes complying with the current employer coverage mandate provision without any changes would increase its monthly health benefits costs by more than $62,000, or by more than $744,000 per year.

The administrative costs associated with compliance would be about $40,000 per year, Uprichard said.

“Offering coverage to temporary employees will be virtually impossible because their long hours fluctuate and they would be moving in and out of coverage constantly,” Uprichard said.

The employer and the employee control the hours, Uprichard noted.

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U.S. Health Insurance Cost Rises Sharply, Study Finds

By REED ABELSON New York Times
Published: September 27, 2011

The cost of health insurance for many Americans this year climbed more sharply than in previous years, outstripping any growth in workers’ wages and adding more uncertainty about the pace of rising medical costs.

A new study by the Kaiser Family Foundation, a nonprofit research group that tracks employer-sponsored health insurance on a yearly basis, shows that the average annual premium for family coverage through an employer reached $15,073 in 2011, an increase of 9 percent over the previous year.

“The open question is whether that’s a one-time spike or the start of a period of higher increases,” said Drew Altman, the chief executive of the Kaiser foundation.

The steep increase in rates is particularly unwelcome at a time when the economy is still sputtering and unemployment continues to hover at about 9 percent. Many businesses cite the high cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. Over all, the cost of family coverage has about doubled since 2001, when premiums averaged $7,061, compared with a 34 percent gain in wages over the same period.

How much the new federal health care law pushed by President Obama is affecting insurance rates remains a point of debate, with some analysts suggesting that insurers have raised prices in anticipation of new rules that would, in 2012, require them to justify any increase of more than 10 percent.

In addition to increases caused by insurers getting ahead of potential costs, some of the law’s provisions that are already in effect — like coverage for adult children up to 26 years of age and prevention services like mammogram screening — have contributed to higher expenses for some employers.

The Kaiser survey includes both big and small companies using employer-sponsored coverage representing about 60 percent of all insured Americans of working age. The annual growth in premiums, according to the survey, had slowed in recent years to 5 percent, rising just 3 percent in 2010, in part due to the lingering effects of the recession. After years of double-digit increases, the moderation was a welcome relief.

The unexpected increase in premiums raises questions about whether health care costs are, in fact, stabilizing at all, as people have postponed going to the doctor for a check-up or dentist for Pediatric Dentistry and Orthodontics and have put off expensive procedures. “No one quite knows,” said Mr. Altman.

Throughout this year, major health insurers have defended higher premiums — and higher profits — saying that their expenses would rise once the economy recovered and people believed they could again afford medical care. The struggling economy will probably keep suppressing demand for medical care, particularly as people pay a larger share of their own medical bills through higher deductibles and co-payments, according to benefits consultants and others. About three-quarters of workers now pay part of the bill when they go see a doctor, and nearly a third have a deductible of at least $1,000 if they have single coverage, up from just one in 10 in 2006, according Kaiser.

Although demand for care appears to be growing relatively slowly, insurers and benefit consultants also say prices for medical care continue to climb as prescription drug makers and hospitals charge more. “If they’re a popular brand or anchor hospital, they’re going to negotiate a significant increase if they can,” said Edward A. Kaplan, a benefits expert with the Segal Company, which recently surveyed insurers about medical costs.

The question for employers and insurers is whether the lackluster economy, as well as recent efforts by employer and insurers to better manage the medical care of workers, will keep premiums increasing at a more moderate level. Early responses to a survey by Mercer, a consulting firm, suggest employers are expecting the cost of providing health benefits to go up about 5 percent next year, according to Beth Umland, Mercer’s director of research for health and benefits. These companies may be factoring in the more pessimistic view of the economy, she said, where any recovery seems further off than it did a few months ago.

Employers are reporting that their workers are using less medical care, said Ms. Umland, but they and insurers have been slow to estimate costs that reflect the lower demand. “It always takes a while for underwriting to catch up with reality,” she said.

Some small business say they expect their premiums to moderate, but only because of changes in their work force — partly caused by younger, healthier employees — that make it less likely that the companies will incur high medical claims. “Up until last year, we saw very hefty increases — double digits,” said Heather Gombos, an executive for R. M. Jones & Company and affiliated businesses in New Britain, Conn., a group that insures about 50 of its 80 employees.

Family coverage is now running $12,000 a year, Ms. Gombos said, and she is waiting to see what rate increases her insurer proposes for the coming year. She thinks premiums will not rise as sharply in 2012. “What it comes down to is we’ve had some good luck,” she said.

Some businesses say they anticipate relief from higher costs in the coming year for a variety of reasons. At Ogilvy & Mather, the New York advertising firm, the company believes its efforts to encourage wellness and better oversee its employees’ health through an on-site medical clinic are paying off. “We are not anticipating any cost increase for employer and employee,” said Gerri Stone, the senior partner who oversees the firm’s benefits strategy.

Ms. Stone acknowledged that the firm’s 3,600 employees were relatively young and healthy, helping it avoid some of the sharp increases experienced by other businesses. “We’ve never gone into the double digits,” she said. Family coverage runs about $16,000 a year, she said.

Insurers and benefits consultants say, however, it is difficult to predict whether health care demand will again take off when the economy rebounds or whether some other factor is at play. “We’ve seen a moderation in the increase in health services, particularly in discretionary services,” said Tom Richards, an executive with Cigna. While he attributes some of the moderation to the poor economy, he says the increase in cost-sharing by employees and programs that more closely monitor their health could be having a more permanent impact.

The question, he said, is “what is the economy going to be and what is the new normal.”

Obama administration officials argue that new regulations are forcing insurers to be more circumspect about raising rates. Insurers seeking to raise premiums next year by more than the 10 percent maximum will have to publicly justify their rate increases, and the new law requires the companies to spend at least 80 cents of every dollar they collect in premiums on medical care. If they end up taking too much in premiums, they will have to refund the money to consumers.

But employers and others say much more still needs to be done to control overall costs, especially when workers’ wages are essentially flat. Of the $15,073 in average premiums paid for family coverage, Kaiser found that employees paid $4,129 towards the cost, in addition to whatever out-of-pocket costs they shouldered.

“We’re going to continue to have this yawning gap,” said Helen Darling, the chief executive of the National Business Group on Health, which represents employers that provide health coverage to their workers. Health care costs continue to climb much faster than overall inflation, she noted.

“The health economy acts as if it’s a boom economy,” she said.

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Workers See Steep Increases in Deductibles

Workers are paying an average of nearly $4,000 for family health coverage — an increase of 14% compared to last year, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust. Employees are paying quite a bit more even though premiums for family coverage rose an average of only 3% to $13,770 in 2010. The amount employers contribute for family coverage did not increase.

PPOs continue to dominate the employer market, enrolling 58% of covered workers. Average PPO family premiums topped $14,000 annually in 2010. Since 2005, workers’ contributions to premiums have gone up 47%. Since 2005 premiums rose 27%, wages rose 18%, and inflation rose 12%. Many employers are also raising the employee’s annual deductibles. Twenty-seven percent of covered workers now face annual deductibles of at least $1,000 compared to 22% in 2009. Forty-six percent of workers in small firms (3 to 199 workers) have such deductibles.

Kaiser president and CEO Drew Altman, Ph.D. said, “With the economy struggling, businesses have been shifting more of the costs of health insurance to workers through premiums, deductibles, and other cost-sharing. This can be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive. From a consumer perspective, the cost of health insurance just keeps going up faster than wages.” Thirty percent of employers say that, in response to the economic downturn, they reduced health benefits or increased cost sharing and 23% increased what employees pay for coverage.

Only consumer-driven plans saw growth in their market share in 2010. These high-deductible plans, which include a health savings account or health reimbursement arrangement, now enroll 13% of covered workers, up from 8% last year. “Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4% in 2006 to 13,” said study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.

Surprisingly, the percentage of firms offering health benefits in 2010 increased sharply to 69%, up from 60% in 2009. That’s largely due to an increase in the offer rate among firms with three to nine workers. Because most workers work for large firms, the shift among the smallest firms did not have a major effect on the percentage of workers who are offered health benefits or who are covered at their job. A possible explanation is that non-offering firms were more likely to fail during the past year, leading to a higher offer rate among surviving firms. Other findings from the survey include the following:

• Single coverage — Premiums for worker-only health benefits increased 5% in 2010 to reach $5,049 annually. Workers are paying an average of $899 a year for single coverage, up from $779 in 2009. Forty-seven percent of covered workers are in single coverage plans.

• Physician office visits – The average co-payment for primary care increased from $20 to $22 for in-network physician office visits from 2009 to 2010. It increased from $28 to $31 for specialty care during the same period.

• Mental health benefits — 31% of firms with more than 50 workers made changes to mental health benefits in response to the 2008 Mental Health Parity and Addiction Equity Act. Most eliminated limits on coverage to comply with the law, though 5% dropped mental health coverage altogether.

• Wellness benefits — 74% of employers that offer health benefits offer at least one of the following wellness programs: weight loss program, gym membership discounts or on-site exercise facilities, smoking cessation program, personal health coaching, classes in nutrition or healthy living, web-based resources for healthy living, or a wellness newsletter.

• Health risk assessments — 11% of employers that offer coverage give employees the option of completing a health risk assessment. Two percent of employers offer financial incentives as part of the wellness plan, such as lowering the worker’s share of premiums or offering merchandise, gift cards, travel, or cash to their workers. Large firms are more likely to offer assessments and to offer financial incentives.

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Insurers’ rate quote practice is unfair to consumers

Shoppers are routinely asked to disclose their current provider’s rate, which all but guarantees that no one will provide coverage for much less.

Let’s say your barber is increasing the cost of haircuts. Is it fair for other barbers to require that you disclose how much you were being asked to pay before they say how much they’ll charge?

That hypothetical example illustrates the situation many California businesses find themselves in when they go shopping for health insurance. By routinely having to reveal the size of a rate increase to other insurers, they all but guarantee that no one will provide coverage for much less.

“It’s price fixing,” said John Antonelli, president of ARSLegal in Whittier. “If my company tried this, we’d be thrown in jail.”

His business, which handles document copying for law firms, has 135 employees. Antonelli said ARS had been paying about $600,000 annually to Blue Shield of California to provide health coverage to workers and their families.

But serious illnesses involving a handful of workers and their family members prompted Blue Shield to raise the company’s annual premium last year 60% to almost $960,000, he said.

So Antonelli had his insurance broker put out a request for quotes from other firms. He knew from experience that he’d have to disclose information about the general health of his workforce. What he hadn’t expected was a requirement among insurers that he also disclose how much Blue Shield wanted to raise his company’s rates.

The California Department of Insurance says this isn’t a legal requirement. But brokers and insurance-industry officials say it’s a standard practice to ask how much a company’s current insurer wants to charge for annual premiums.

“If you don’t tell them, you don’t get a quote,” said John Barrett, a Pasadena health insurance broker. “It’s that simple.”

From the insurer’s point of view, that’s understandable. Insurers will do everything possible to minimize their exposure to risk. The more they know about a company’s insurance history, the easier it is to tailor a policy that keeps losses at a minimum.

“That’s not price fixing,” Barrett insisted. “It’s full disclosure.”

But it also speaks to a distinct lack of competition in the marketplace. Knowing what a rival wants to charge can be a strong incentive for other insurers to keep their own prices high, said Laurence Taylor, a broker with Pegasus Capital & Insurance Services in downtown Los Angeles.

“It’s an unfortunate situation,” he said. “It makes things tough for employers.”

Antonelli’s position is that as long as he’s upfront about his employees’ insurance claims, why should he have to stack the deck in an insurer’s favor by declaring how much a competitor wanted to charge?

“I’m happy to tell you about the health of my employees,” he said. “But you give me a bid on your own, not based on what Blue Shield wanted to charge.”

In his case, the lowest bid received from another insurer for comparable coverage still represented a hefty 25% rate hike, which Antonelli reluctantly accepted.

California law limits how much insurers can charge businesses with fewer than 50 workers, so it’s relatively easy to obtain reasonable quotes from multiple providers.

Things are different for larger businesses. Because insurers have more latitude when it comes to prices, they’ll often seek whatever they think the market will bear.

For a medium-size company like Antonelli’s, with relatively little bargaining muscle compared with an enterprise with thousands of workers, that can be a real challenge. Such companies typically have to settle for whatever they can get from insurers.

One other thing that’s striking here: The punitive nature of filing claims. In Antonelli’s case, his company willingly paid about $600,000 a year for health insurance. But as soon as a few serious cases materialized — one worker had heart trouble, the spouse of another got cancer — Blue Shield jacked up the company’s rates.

That’s quite a product. Don’t use it, and it’ll cost you $600,000. Use it, and your cost will soar to almost $1 million. A Blue Shield spokesman declined to comment.

Patrick Johnston, president of the California Assn. of Health Plans, an industry group, said knowing how much another insurer is charging can be a crucial data point when determining a company’s medical risk.

“If the rate is high, it would suggest to other insurers that the claims experience is high and likely to remain high,” Johnston said. “Therefore, the insurer quoting the bid would be cautious about estimating on the low side.”

And that’s how you get a vicious cycle whereby insurance rates inevitably skew higher. All it takes is one large rate increase for all other insurers to fall in line, regardless of what their own due diligence might tell them.

A bill in Sacramento, AB 52, would have given state regulators the authority to block unreasonable rate increases. But it fell apart last week when backers acknowledged they didn’t have the votes to get it passed.

At the very least, lawmakers should take a closer look at insurers requiring a competitor’s renewal rate before offering a quote for health coverage. This is an unfair and unreasonable practice that tips the scales too far on insurers’ behalf.

Insurers should have access to relevant claims data in pricing their contracts. All parties should be making informed decisions when it comes to health coverage.

But lawmakers should prohibit the requesting of a rival’s rates. It serves to make insurers lazy in their price estimates and to encourage costlier policies.

Healthcare is expensive enough. We don’t need to perpetuate a system that makes things worse.

 

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Employers Are Not Planning Big Changes to Health Plans

Employers are planning only moderate changes to their healthcare plans in 2012, according to a survey by Towers Watson. Ron Fontanetta of Towers Watson said, “With so much still unknown regarding both the short- and long-term impact of healthcare reform, most employers will not make wholesale changes to employer-sponsored health plans in 2012. However, a small group of employers is driving more fundamental change in 2012 by using account-based platform designs, aggressively positioning incentives and rethinking subsidization levels.”

Eighty-eight percent plan to take steps to control their costs and avoid the impact of healthcare reform’s excise tax. The average annual cost of medical and pharmacy coverage is $11,204 per employee. Forty-five percent will rethink their healthcare strategy over the long-term and many are uncertain how they will respond to the looming impact of state-based insurance Exchanges in 2014. Employer healthcare costs are expected to rise 5.9% 2012 compared to 7.6% in 2011.

Seventy-one percent of employers plan to continue offering healthcare coverage through 2014. Most of the remaining 29% are not sure whether they will continue offering health benefits or offer a salary increase to offset lost benefits. Fifty-four percent of employers that offer healthcare benefits to retirees plan to discontinue them.

Fifty-three percent of employers say they are confident that healthcare reform will be implemented in the anticipated timeline, but 70% are skeptical that health insurance exchanges will provide a viable alternative to employer-sponsored coverage in 2014 or 2015.

Fifty-six percent of employers believe that they will trigger the excise tax by 2018. Yet more than three-quarters believe that healthcare benefits will continue to be a key component of their benefit offerings beyond 2014.
Employers are planning or considering the following actions between now and 2014:
• 58% plan to increase the use of preferred networks.
• 49% plan to use value-based benefit designs.
• 17% plan to add account-based health plans (such as HSAs or HRAs) in 2013 or 2014, which would result in nearly 74% of employers offering them.

For 2014 and 2015, 57% of employers are considering reducing employee healthcare contributions for lower-paid workers and 47% are considering making a substantial reduction in the value of the healthcare benefits they offer.

Sixty-six percent of employers will increase employees’ share-of-premium contributions for single-only coverage for 2012. Seventy-three percent of employers will increase the employees’ share-of-premium contributions for dependent coverage.Cost shifting is expected to continue well beyond 2012. By 2013 or 2014, 23% of employers are considering significantly reducing their subsidization of coverage for spouses and dependents. Nineteen percent are considering using spousal waivers and surcharges when other coverage is available.
The survey also reveals the following:

• 70% expect to lose grandfathered status by 2012.
• 57% are considering rewarding or penalizing their employees based on biometric outcomes compared to 8% today.
• 32% don’t offer healthcare coverage to part-time employees.

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