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The Changing Face of the Health Insurance Crisis

American businesses face a growing crisis in health insurance coverage that is changing the face of the workplace in profound ways. As health insurance costs skyrocket for both the employer and employee, businesses try to cope with the shifting landscape of a shaky economy and rising unemployment.

One of the effects of this changing environment is that millions of workers and retirees will find themselves uninsured or paying a greater share of their health insurance costs. As with 401(k) retirement plans, employees will assume more responsibility for their own health care by choosing what kind of insurance coverage and how much medical care they will receive.

Here are some contributing factors in this health insurance crisis:

* Dramatic increases in health insurance premiums.

Health insurance premiums this year are expected to increase an average of 13 percent to 15 percent, the steepest increase in a decade. That's on top of average increases last year of 11 percent. Next year's increases will be at least as high as this year's and probably higher.

* State and federal government mandates.

Ballooning state and federal mandates regarding which health conditions that must be covered are blamed by insurers and business groups for the increasing premiums. The Bush administration's recent decision to treat mental illness the same as physical illness is seen by many groups as another good intention that will cost employers and employees more.

* Decline of managed care.

While managed care was able to hold premium prices down during much of the 1990s, it wasn't able to hold back the underlying growth in health care costs. This is especially true regarding prescription drugs and hospital costs.

* Rise of hospital providers.

Managed care led to a consolidation of health care providers, which have turned the tables on managed care organizations in negotiating payments. Where HMOs once threatened to exclude individual hospitals that didn't meet their pricing demands, now hospital groups are threatening to exclude HMOs.

* Wall Street cycles.

Managed care groups were considered to be a good investment in the '90s because their enrollment growth drove up profits. However, as enrollments have been declining companies are now looking at higher prices to maintain profits.

* Aging baby boomers.

The first wave of the 77 million Americans born between 1946 and 1964 are already reaching their mid-50s and are requiring more care. Today's boomers are demanding expensive cutting-edge medical technology and are being influenced by consumer-oriented advertisements for prescription drugs.

* More Americans are losing their health insurance.

Families USA, an advocacy group for broader insurance coverage, recently estimated that the major corporate layoffs during 2001 resulted in 2.2 million more workers losing insurance coverage. That means there could now be up to 41 million uninsured Americans.

* Workers will pay more for premiums.

A Hewitt report last October predicted that many companies this year will pass on at least 25 percent to 30 percent of their premium increases to employees, which means increases ranging from $186 to $463.

* The way workers choose health care coverage is changing.

Instead of "defined benefit" plans in which employers buy a health insurance policy and employees pay a share of the premiums, there is a growing movement toward "defined contribution" plans. Under such plans, the employer puts up a certain amount of money, and workers buy health coverage and services from a menu of options.

One consumer-directed model is a medical spending account.

Under this model, an employer contributes a fixed amount into a worker's accounts. During the year, the worker pays all medical bills out of this account. When the account is exhausted, the employee is responsible for all subsequent expenses up to some "catastrophic" level, above which insurance takes over.

Another model allows workers to buy "multi-tiered" coverage under which the amount of their co-payments depends on the cost of hospital treatment and drug treatments they receive. High-cost hospitals and name-brand drugs require a higher co-payment.

For ideas on how to cope with this situation in your workplace you can contact us here.

6. Briefs 

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