Cost Concerns, More Workers Leave Firms' Health Plans
By Vanessa Fuhrmans
The Wall Street Journal
Friday, August 25, 2006
Fewer and fewer workers can afford what once was the best
bet for generous health insurance: the benefits offered by
the country's biggest employers.
Large companies -- those with at least 1,000 employees --
have long been considered the best means of ensuring good,
affordable medical benefits, even as soaring health-care
costs have pushed more smaller businesses to drop coverage.
While the number of small companies providing health
benefits has fallen dramatically in recent years, 98% of
these bigger companies still offer them.
But in recent years these big companies have also increased
the premiums, deductibles and co-pays that employees must
contribute under these programs, leading many workers to
forgo their employers' insurance. Between 1996 and 2004,
the number of private-sector employees who enrolled in the
health-benefits plans offered to them declined from 87.7% to
81% at big employers, according to new government data.
"Large employers aren't stopping coverage," says Jim
Branscome, survey statistician for the Agency for Healthcare
Research and Quality, which conducts the annual survey.
"But what they're doing is passing on more of the cost of
insurance to their workers."
The survey, which polled more than 45,000 separate offices,
plants and other sites of employers, doesn't look at how
many workers who declined job-related benefits got insurance
elsewhere. One reason for the declining proportion of
employees covered at big companies is that far fewer working
married couples sign up for benefits at each spouse's
company, as was typical just a few years ago. Premiums and
costs have risen high enough that more of these couples pick
whichever plan offers the best deal and sign the whole
family onto it.
But the biggest reason appears to be that even
company-subsidized health care is proving unaffordable or
providing too little upfront value to many workers. The
sharpest drop in participation rates was among large
retailers, where the share of eligible workers opting for
company benefits fell to 67.3% from 83.8% over the eight
years. But health-plan participation in other industries
also has declined, even at companies with unions, many of
which have fiercely fought employers' efforts to shift more
health-care costs onto workers.
For many workers, it is a matter of the premiums employers
require them to contribute. Last year, families paid an
average $226 in monthly premiums, a quarter of the total,
according to the Kaiser Family Foundation, a nonprofit
health-policy research group based in Menlo Park, Calif.
But many companies are requiring workers to chip in a third
or more, or are no longer subsidizing the premiums of
spouses or children. In those cases, participation rates
drop off even more.
Sarah Landis, a nursing assistant at Children's Hospitals
and Clinics of Minnesota, says high premiums are why she
opted out of her health plan. While a spokeswoman for
Children's, which employs around 4,000, says the
not-for-profit hospital system has actually lowered
employees' share of premiums to 30% of the total, from 50%
three years ago, Mrs. Landis says the monthly payment of
$543 is about one-third of her income. (A high-deductible
family plan is available for $295 a month, and a
middle-of-the road-plan is $359.)
"It's a choice between our house payment and health
insurance," says 25-year-old Mrs. Landis, who has two young
daughters. Apart from her husband's asthma, which requires
the couple to pay $70 in prescription drugs each month, all
four are healthy, she says. So when her husband left his
job to become self-employed three years ago, the family went
uninsured. He may take a law-enforcement job so the family
can get coverage again soon. In the meantime, Mrs. Landis
says, "we just hope we don't get sick."
The Children's spokeswoman says the health-plan
participation rate of eligible people in Mrs. Landis's
union, which includes janitors and maintenance workers, has
climbed to 69% from 63%; overall, she says, 82% of
Children's total plan-eligible work force have taken company
Health plans have typically been the great leveler within
companies; no matter the wage, nearly everyone got the same
health benefits. But now, disparities are emerging because
low-paid employees are dropping coverage. "That's going to
be more and more true as premiums go up," says Linda
Blumberg, economist and principal research associate at the
Urban Institute, a Washington-based policy-research group.
Beyond premiums, other changes in the way health plans are
being designed may also be dissuading particularly low-paid
workers from signing up. In an effort to control medical
spending, a growing number of companies are moving to
high-deductible plans with savings accounts that are
designed to give the plan member more of a financial stake
in their health-care consumption.
But some policy experts argue that with deductibles that go
as high as $5,000 in a given year, lower-wage workers may be
reluctant to pay a premium for a benefit they are unlikely
to receive. Few such workers have enough money to save in
the tax-free accounts these plans often come with. "At some
point, many people are asking, 'Does it even make sense for
me?' " says Ms. Blumberg.
Much still depends on the design of the plan. Last October,
Wal-Mart Stores Inc. introduced an option called the "Value
plan," with deductibles of between $1,000 and $3,000,
monthly premiums ranging from $11 to $65 and three
predeductible doctor visits, which was apparently acceptable
to more people. It also lowered eligibility requirements
for some workers.
Since Wal-Mart began offering the new plan, 70,000 employees
who were eligible but had waived some sort of company health
coverage before have signed up for it, a spokesman said. Of
those people, 78% answered in a company survey that they had
been previously uninsured. Wal-Mart offers other high
deductible plans with deductibles as high as $6,000 for
Reaction to Target Corp.'s "consumer-directed" plans, made
available to most of its 338,000 employees earlier this
year, isn't known. (The company didn't return phone calls
seeking comment.) The new plans' premiums are lower than
the range of $17.66 for individuals to $74.19 for families
that workers pay each week under the traditional plan, but
the deductibles can reach as high as $4,200. A Target guide
given to employees said the traditional plan would be phased
out at some point.
Write to Vanessa