Workers increasingly uninsured by employers

"Some health care economists - and many insurance companies - argue
that costs will never come under control until the users of medical
services feel the financial sting."

"The huge rise in health care costs has to be paid by somebody," said
Alain C. Enthoven, a health economist at Stanford University. "If some
employers had to pay it all, it might push them into losing money."

"As a result (of prescription cost increases), the elderly paid 22
percent of their average median income, or $3,757, for health care
last year - a larger proportion than the 20 percent of income they
spent before the advent of Medicare."

One third of uninsured workers in 2002 worked for large corporations
with more than 500 employees, a figure that has gone up. The
percentage of uninsured workers in medium and small companies has
decreased slightly.
http://story.news.yahoo.com/news?tmpl=story&cid=541&ncid=541&e=3&u=/ap
/20031021/ap_on_he_me/uninsured_workers_2




New York Times, October 22, 2003

Workers Feel Pinch of Rising Health Costs

By MILT FREUDENHEIM

As health care costs head into a fourth consecutive year of
double-digit increases, employers are shifting a growing share of the
burden onto people who make the heaviest use of medical services.

The trend - evident as companies begin informing workers of their
benefit choices for the coming year - takes the form of fast-rising
co-payments and deductibles, higher payroll deductions to cover
spouses and children and new kinds of health plans that give workers a
fixed sum to spend.

On average, the annual out-of-pocket costs for employees of large
companies have more than doubled since 1998, to $2,126 this year,
according to Hewitt Associates, a benefits consulting firm. Hewitt is
expecting a 22 percent jump next year, to $2,595.

Costs are up sharply, too, for workers who pay a monthly insurance
premium but rarely see a doctor. However, employers have sought to
temper those increases, so healthy workers are not tempted to drop
their coverage, experts say.

"Employers didn't want to discourage the take-up of insurance," said
Paul B. Ginsburg, an economist who is president of Health System
Change, a Washington-based research center. "They have made a very
conscious decision to increase the patient's cost-sharing rather than
increase the employees' share in the premium."

Employers still pay the bulk of their workers' health care bills, but
their contribution has slipped over the last five years, to 70 percent
of total health care costs from 75 percent, according to Hewitt's
latest survey of 300 employers with 5,000 or more workers, released
last week.

And more workers are going without insurance, even at large companies.
According to a report issued yesterday by the Commonwealth Fund, which
studies health policy issues, 9.6 million workers and family members
at companies with more than 500 employees did not have
employer-provided health coverage in 2001.

At the nation's largest private employer, Wal-Mart Stores, only about
half the roughly one million domestic employees are in a company
health plan, said Mona Williams, a Wal-Mart vice president. Of the
500,000 others, half are ineligible because they were hired too
recently; many depend on parents, a spouse or a government program for
coverage, Ms. Williams said.

The figures for big companies reflect a broader shift in the American
economy away from mechanisms that for decades have spread the burden
of health care costs onto more shoulders.

Largely because of the booming cost of prescription drugs, for
example, Medicare covers less of its beneficiaries' health care
expenses than at any time since the program was established in 1965,
according to Robert M. Hayes, president of the Medicare Rights Center,
a patient advocacy group.

As a result, the elderly paid 22 percent of their average median
income, or $3,757, for health care last year - a larger proportion
than the 20 percent of income they spent before the advent of
Medicare.

The number of Americans without insurance has, meanwhile, grown to
43.6 million at last count, the highest since 1998, according to the
Census Bureau. Billions of dollars of their health costs are absorbed
by hospitals or federal programs, and experts say that the uninsured
skimp on care, compared with people who have workplace coverage.
Still, uninsured families this year are averaging $772 in
out-of-pocket spending, said Jack Hadley, a health care researcher at
the Urban Institute, a policy research group in Washington.

All these trends fall most heavily on people who are sick or who
otherwise are heavy consumers of medical services. They are also
fueling national policy debates, like the push for a Medicare drug
benefit, the campaign for loosened restrictions on imported drugs and
calls for expanded public programs by most of the Democratic
presidential candidates.

"Shifting costs to patients, particularly in the form of higher
deductibles for hospital care, disproportionately affects the sickest
Americans," said Karen Davis, president of the Commonwealth Fund. "It
is not an acceptable response to rising health care costs to make care
so expensive that those who need it fail to get it."

Some health care economists - and many insurance companies - argue
that costs will never come under control until the users of medical
services feel the financial sting. Generous coverage, they contend,
long gave Americans and their doctors a perverse incentive to indulge
in wasteful consumption of expensive drugs and diagnostic tests. In
its more restrictive forms, managed care made patients jump through
bureaucratic hoops to obtain treatment, but experts say it, too, did
little to expose consumers to the true costs of health care.

"Employees who were paying $20 for a doctor visit had no idea that the
average cost was really $93," said Liz Rossman, vice president for
benefits at Sears, Roebuck & Company. In the current sign-up period,
Sears is hoping that many employees will select new plans that require
them to pay 20 percent of the full cost of doctor visits, hospitals
and brand-name drugs, or 25 percent for going outside the Sears
network.

Hewitt said that a few large employers were offering a new type of
health plan, sometimes called consumer directed, that gives workers an
unfiltered view of health bills - and often increases their costs.
Employees get an allowance to spend on medical expenses. If they
exhaust it, they use their own money until they reach a limit,
typically $3,000 to $5,000, when the plan starts paying.

"The whole point is to change their purchasing behavior," said Kenneth
Sperling, a consultant with Hewitt.

More commonly, some employers have shifted costs by offering limited
basic coverage that employees can enhance by paying more in premiums.

But cutbacks in coverage can be brutal for some patients.

"I'm having to beg for my insulin," said Cathy Barkovich, 33, a
diabetes patient in Harmony, Pa.

She said her husband's health plan stopped paying for her brand-name
prescriptions in July; the American Diabetes Association says that no
generic equivalent exists. When she applied to a manufacturer's free
insulin program, she was told that only uninsured patients were
eligible. Her husband, a $40,000-a-year interstate bus driver, is
considering dropping their coverage so she can get the drug, Ms.
Barkovich said.

Last year, shifting costs to patients - mainly in drug coverage -
"probably took a percentage point off" the increase in the use of
medical services, which has been rising at about 9 to 10 percent a
year, said Mr. Ginsburg, the health economist. Almost two in three
employers now require patients to pay higher co-payments for drugs not
on a preferred list: flat rates as high as $30 per prescription, or
sums as high as 29 percent of the actual cost.

"People view that as a success in discouraging the use of the most
expensive drugs," said Gary Claxton, a vice president of the Kaiser
Family Foundation, whose survey of employer health benefits was
published last month. Whether recent increases in deductibles and
co-payments for hospitals will also reduce the use of services is not
yet clear, he added.

One in 20 self-employed workers dropped their coverage last year,
according to the Employee Benefit Research Institute, a nonprofit
research center in Washington. But almost all employers held onto
their insurance, by shifting more costs to workers.

Precision Pattern, an aerospace industry supplier in Tacoma, Wash.,
with 135 employees was facing a 16 percent increase in premiums, said
Bonnie Olson, the company's human resources director. Precision
switched to a new provider, BENU, which offers small and medium-size
employers a range of six health plans from Cigna Healthcare and Group
Health of Puget Sound, a Seattle health maintenance organization.

The company's premiums rose less than 10 percent, she said, but now
employees must either accept the restrictions of a basic H.M.O. at
Group Health or pay more to maintain or exceed their former benefits.

The company pays the entire premium for about 50 employees who chose
the basic plan; these workers then pay $15 for office visits, 20
percent of other costs and $263 a month to cover a spouse.

Most Precision workers chose a Cigna plan offering a broader choice of
doctors through a preferred-provider network, at $359 a month for an
individual and either a spouse or children. This option includes an
$800 family deductible for services obtained outside the network, up
from a $200 deductible in the old plan that applied only to visits to
specialists.

"The huge rise in health care costs has to be paid by somebody," said
Alain C. Enthoven, a health economist at Stanford University. "If some
employers had to pay it all, it might push them into losing money."