Employers Too Generous with Health Benefits?

Ninety-nine percent of companies offer some type of health insurance coverage, HR study finds.

Health-care costs are rising, and employers are requiring their rank and file to pay an increasing portion of their monthly premium and higher deductibles.

Even so, many employers continue to provide generous health-care benefits to workers, according to the Society for Human Resource Management’s 2002 Benefits Survey.

A total of 99 percent of respondents’ organizations offer some type of health insurance coverage, whether it be through a preferred provider organization (PPO), health maintenance organization (HMO), exclusive provider organization (EPO), indemnity, or defined-contribution plan.

Employers, apparently, are holding the line on health benefits despite the current wave of stiff price increases. “The shocking issue is that health care costs are going through the roof,” says Bob Gibson, vice president of administration, for Missouri Employers Mutual, a Columbia, Mo.-based workers’ compensation insurer. In fact, the company was socked with an 18 percent rise in its health-benefits premiums for coverage that renewed January 1.

But Missouri Employers isn’t asking its workers to pick up any of the costs increases in its benefits plan. Two years ago, the company did hike out-of-pocket deductibles from $100 to $250. And it changed its $15 maximum prescription drug copayment to a three-tiered system in which employees paid maximums of $10 for generic drugs, $20 for drugs listed on a formulary, and $30 for brand name pharmaceuticals.

Unlike the situation in other parts of the country, however, Columbia workers have enjoyed a particularly competitive job market, with unemployment only around 2 percent, says Gibson, who handles human resources for Missouri Employers. Further, when the company negotiated its health benefits renewal in September, the area’s economy “was going hot and heavy,” he says.

Thus, rather than risk losing employees to competitors with more alluring benefits, the company decided to pay the full premium increase without recourse to coinsurance or deductibles.

Apparently the company isn’t alone. “Employers have largely absorbed many of the health-care cost increases in recent years and will do their best to bear much of the double-digit increases expected in the future,” says SHRM CEO Susan R. Meisinger. “They do this because they know that health-care coverage is one benefit employees can’t and won’t overlook.”

Sore Shoulders

But Meisinger also points out that “employers won’t be able to shoulder the entire burden, and many have already made adjustments in employee co-pays or will in the near future.”

The survey of 551 HR professionals included 187 benefits offered by employers. Benefits offered by a bigger chunk of employers include vision insurance (a jump from 60 percent to 73 percent over the last five years), long-term-care insurance (which leaped from 33 percent to 48 percent from 1998 to 2002), and well-baby programs (which rose from 47 percent to 57 percent since 1999.)

While SHRM polls different random samplings of its members each year, certain long-term trends may be detected. The rising numbers of employers offering some benefits have a lot to do with changing demographics, Gibson thinks. For instance, “more vision care is expected by older Americans” who make up a growing portion of the workforce, he says.

The graying of the American workforce has also been a factor in boosting long-term-care benefits offerings. “With both spouses working, the elder-care giver is probably in the workforce and so is not available to give [care]” on his or her own, says Gibson. Another reason more employers are offering the benefit, he adds, is that the AARP has pushed it strongly.

The large number of working mothers has led employers to offer well-baby benefits, he thinks. In Missouri, a recent state law mandated that companies offer such coverage, Gibson notes. The law, which also mandated cancer screening, was almost certainly a factor in his company’s recent premium hike, according to the HR executive.

Not all health benefit offerings have been on the rise, however. The survey, for example, recorded a decrease in the portion of employers offering mental health insurance since 1998, from 84 percent to 76 percent. Gibson, a member of SHRM’s compensation and benefits committee, thinks, however, that the drop in specific mental health coverage has been largely picked up by employee-assistance-plan coverage or under other health-plan benefits.

A non-medical benefit that has shot up in popularity—from 60 percent to 70 percent of employers offering it over the last five years—is the dependent-care flexible spending account. Such accounts enable employees to use pre-tax dollars to pay for deductibles and coinsurance for their dependents.

The reason for the rise in dependent-care flex accounts is simply that more employers know about it, Gibson thinks. “It’s just such a no-brainer,” he says. “It costs the employers nothing to offer it.”

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