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Employers Pass the Buck on Rising Health Care Costs

Benefit Changes Include Increased Patient Cost Sharing and Less-Generous Family Coverage Policies

News Release
May 26, 2004

FURTHER INFORMATION, CONTACT:
Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.—Rather than dramatic health benefit overhauls, most employers have made modest changes, primarily by shifting costs to workers through larger premium contributions or higher out-of-pocket costs to fill a prescription or see a doctor, according to a study released today by the Center for Studying Health System Change (HSC).

"Despite predictions that the weak economy would spark an overhaul of health benefits, most employers have moved cautiously—but steadily—to increase what patients have to pay," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded principally by The Robert Wood Johnson Foundation.

"Increased patient cost sharing appears to be employers’ default plan, but most lack confidence that this strategy alone will provide a long-term solution to escalating health costs," Ginsburg said.

The study’s findings are detailed in a new HSC Issue Brief—Employers Shift Rising Health Care Costs to Workers: No Long-Term Solution in Sight. The study is based on HSC’s 2002-03 site visits to 12 nationally representative communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y.

"Most employers were unwilling to run the risk of alienating workers by curtailing their choice of physicians and hospitals—in essence, they maintained choice at a price," said HSC Research Assistant Lydia Regopoulos, coauthor of the study with HSC Senior Researcher Sally Trude, Ph.D.

Along with shifting costs to workers, some employers are promoting public insurance as an alternate source of coverage for children of their low-income employees, and many reported modifying family coverage or planning to do so, using one of two strategies: (1) changing relative premium subsidies between single and family coverage and (2) encouraging workers’ spouses to obtain coverage through their own employers when possible.

Employers increased patient cost sharing either by passing on a larger share of premiums to workers or by increasing copayments, deductibles and coinsurance, where patients pay a percentage of the total cost of care instead of a fixed amount.

For example:

  • Employers who were still paying the full premium-typically large, public employers and those with unionized workforces-started requiring employees to pay a part of their health insurance premium. However, employers that already required worker premium contributions typically did not increase the contribution percentage.
  • Employers with modest patient copayments increased them, for example, from $10 for a physician office visit to $20. Many also introduced new copayments for particular services such as specialist care, urgent care and outpatient surgery.
  • A few employers that already had high copayments replaced them with coinsurance.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.

 

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