With the cost of employer-sponsored health care benefits skyrocketing, it’s time for L.A. employers and employees to work together to solve the problem – at least at a practical local level.
There is no easy answer – or magical solution that will totally cure our health care challenges – but it is possible for employers and employees to collaborate on helping control costs and preserve their coverage levels.
First, we need to understand the problem. Overall, L.A. companies today are spending 12 percent to 20 percent of their revenue on employee benefits, with costs of employer-sponsored health insurance rising rapidly. Since 2001, premiums for family coverage have increased 78 percent, while wages have risen 19 percent and inflation 17 percent. This year, medical costs are expected to increase 9 percent.
Since many employers can no longer absorb the entire premium increase each year, they are forced to redesign benefit plans to shift more financial responsibility to their employees by either decreasing benefit levels or increasing employee contribution levels. Some smaller employers in Los Angeles are eliminating all or parts of their benefit plans, even when they know that a competitive benefit plan is critical to attracting and retaining good employees.
Naturally, employees are exceedingly dissatisfied with the rising cost of insurance premiums and the amount of out-of-pocket expenses they incur. Today, employees are contributing an average of 25 percent toward the cost of their premiums and 50 percent or more toward their dependents’ premiums. Furthermore, each year the cost they contribute is growing exponentially and can be greater than any wage increase they may receive, resulting in a decrease to net pay.
While the Patient Protection and Affordable Care Act – also known as “health care reform” – may be well-intentioned, no one really knows at this point how it will ultimately affect employer-sponsored health benefits. We know that health care reform expands access to coverage, but it does nothing to control rising costs. Some small to midsize employers are modeling their plans to determine whether they should continue to provide benefits or just pay the penalty and let employees purchase their health insurance through the health care reform act’s mandated state insurance exchanges.
Some larger employers in Los Angeles have expressed concern that their young, healthy employees will opt out of the employer-sponsored plans in favor of purchasing lower-cost coverage through the exchanges. If employers are left with an older or unhealthy population in their plans, it would ultimately increase the cost of their employer-sponsored plans.
Right now, the one thing employers and employees can do to better control their health care costs and preserve coverage levels is to approach the problem together. Better communication, transparency and education can be effective tools for achieving this goal.
Employees need to be smart health care consumers, and that means they must:
• Use preventive care (mammograms, Pap and PSA tests, for example).
• Make wellness a priority (eating healthier, exercise, smoking cessation, etc.).
• Know the cost of the services and treatments being sought and spend health dollars wisely (example: generic vs. brand drugs).
• Read and ask questions to understand treatment options and likely outcomes. People will research cars and cell phones but do not do the same when purchasing health care.
• Review bills and explanations of benefit statements to be certain that what is being billed and paid is correct.
Employers should work with their benefit consultants to provide employees with tools and plan designs that empower them to make smart health care choices and to make wellness a priority. Your consultant can help you communicate to employees that their health care decisions affect the overall cost of their benefit plans, and they can impact those costs and preserve benefits by being smarter health care consumers.
For example, frustrated by the rising cost of its benefit program, one firm decided to truly partner with its employees. The benefit director talked to employees openly about what the company had to sacrifice in order to fund the benefit programs (additional staff, better technologies, expansion, etc.) and asked the employees and their families to help by diligently monitoring the money being spent on their benefit programs.
The employees took ownership of their benefit spending, and the company’s benefit costs from 2003-2009 increased only 12.8 percent compared with the national average of 79 percent for the same six-year period. The company rewarded its employees each year for their positive results.
This type of employer-employee partnership demonstrates that it is possible to positively influence and control health care costs. What is needed today is a commitment by both L.A. employers and their employees to find ways to work together to achieve that goal.
Patricia A. Moore is a benefit consultant for Alliant Insurance Services in the company’s L.A. office.
