The Association of U S West Retirees



Citing 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 benefits.

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 families.

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 Fuhrmans at