As health-care costs begin to moderate, the percentage of the cost that employers shift to employees is following suit. In 2007, the portion of the premium that employees pay is expected to rise by 6.5 percent, the smallest increase in years and well down from the 20 percent hikes earlier in the decade. That increase is in line with the 6.1 percent growth expected in the overall cost of health care for the year, meaning that employees are shouldering just a slightly disproportionate share of the total increase. In 2004 and 2005, overall health costs grew at the same 6.1 percent rate, but the share that employees paid through payroll deductions jumped by 12 percent and 13 percent, respectively.
“Employers aren’t shifting as much, because they realized that premium increases were wiping out pay raises,” says Jim Winkler, national practice leader for health care at Hewitt Associates. He says companies are under less pressure to shift costs since overall health expenses aren’t growing as quickly.
Employers are also backing away from additional increases to out-of-pocket costs, such as deductibles and co-pays. “In the past, some employers were more comfortable with increasing out-of-pocket costs instead of premiums because they hit those who use the most care,” says Winkler. However, companies are becoming less inclined to take that approach: out-of-pocket costs will increase 9 percent in 2007, compared with 19 percent in 2004. “The concern is that these costs were starting to create a barrier for employees to get the care they need,” says Winkler.
Instead, employers are increasingly looking to long-term solutions for cutting health-care costs. They are focusing more on experimenting with different plan structures, such as consumer-driven plans; implementing health-improvement initiatives; and working toward digitizing medical records and other health data.