Employees Leave Health Plans as Costs Rise

Employee contributions to health care premiums, deductibles and co-pays are causing more workers to opt out of company-sponsored plans, according to the Towers Perrin 2008 Health Care Cost Survey. The trend is forcing significant numbers of employees to join the ranks of the uninsured, the report said.

The financial burden of health care continues to grow and is becoming dangerously difficult for certain populations to bear, especially low-wage workers and pre-65 retirees,” Towers Perrin wrote in its study that covered Fortune 1,000 companies.  

Uninsured patients account for the vast majority of healthcare providers’ uncompensated care and bad debt expense, healthcare industry experts say. It’s estimated that some 47 million Americans do not have health insurance.

Towers Perrin found that approximately 20 percent of employees in the service sector opt out of employer plans. In general, “industries with lower profit margins or significant cost pressures often provide less subsidized coverage, which results in less participation,” said Dave Guilmette, Towers Perrin’ director of health and welfare practice in a press release.

An employee’s share of health care in 2008 will average $75 a month for individuals or $900 annually, the report says. The average cost to employees for family coverage will be $261 a month or $3,132 annually.

Retirees face even higher costs, the report says. Retirees 65 and over will pay an average of $125 a month for coverage or $1500 annually, while retirees under 65 will pay an average of $277 a month or $3,324 annually.

And employers aren’t doing much to help workers finance their health care in retirement, the report said.

“As organizations cap or reduce their subsidies of retiree medical coverage, they should be compensating by providing health plan options that allow employees to set aside funds for future needs,” said Ron Fontanetta, a principal with Towers Perrin. That’s not happening, “and that suggests that employers are not connecting the dots by positioning tax-favored savings opportunities as a means to help fund post retirement medical expenses.”

The monthly fees employees pay do not cover premiums, co-pays and deductibles. Overall, Americans covered by employer health care plans will pay nearly 59 percent more towards their premium costs in 2008 than they did in 2003, according to the report (“Healthcare Premium Costs Jump 60% in Five Years: Report” Jan. 10).

Towers Perrin is a global professional services firm, offering a specialty in human resources consulting and administrative services.