Employer Coverage: Mounting Challenges, New Approaches

Employers enjoyed relatively low health care cost increases in the mid-1990s, but the situation since then has drastically changed. Employer-paid health care premiums in 2002 rose an average of 12.7 percent, the highest leap since 1990, according to a recent major survey. Benefits consultants project even higher increases for 2003. Meanwhile, small businesses have faced even steeper increases than larger firms. Many have responded by discontinuing health coverage for their workers. Sixty-one percent of small firms offered benefits in 2002, down from 67 percent in 2000.

Many employers that continue to offer coverage have not only by passed along more of the costs to their workers, but also have redesigned their plans to encourage savings. Some are adopting, and even more are considering, “consumer-driven” health plans. These plans seek to put more health care decisions in the hands of employees, who are presumed to be better able to make choices about their own coverage preferences. About 1.2 million Americans are enrolled in consumer-driven health plans, according to a November article in the journal Health Affairs.

What obstacles do employers face in trying to provide health insurance to employees? Will consumer-driven plans actually work in keeping a lid on costs while delivering adequate coverage? How will labor-management relations be affected by such plans? What other strategies are on the table?

These questions and others were addressed at the December 16, 2002 briefing co-sponsored by the Alliance for Health Reform and The Commonwealth Fund. Panelists included: Jon Gabel, vice president of health systems studies at the Health Research and Educational Trust; Helen Darling, president of the Washington Business Group on Health; Adam Miller, benefits consultant, United Auto Workers International Union; and Kate Sullivan, director of health care policy of the U.S. Chamber of Commerce. Ed Howard of the Alliance moderated the discussion.