Recent survey shows challenges employers face offering health care employee coverage

Employee health care insurance is better in California than similar insurance in most other states, but nearly half of the large employers in this state reported that they are likely this year to increase the amount employees contribute to their health plan.
Thirty-seven percent of these large employers (200 or more employees) also said they are likely to boost the employee portion of cost sharing for prescription drugs, while 36 percent say they are likely to increase the amount employees pay toward their premiums.

These were some of the recent findings in the 2007 California Employer Health Benefits Survey. And the numbers contained in the report tell a story of escalating health care costs in a state that outdistances others in terms of rising health care premiums.

In 2007, the total average cost of single coverage in California was $4,482, of which workers contributed $561. The total average cost for family coverage was $12,297, of which workers contributed $3,103. Workers in small firms contributed "significantly more" than workers in large companies, according to the survey.

The report paints a rather gloomy portrait of health care costs in California. For example, premium increases in 2007 (8.3 percent) were more than double the California inflation rate of 3.4 percent, and higher than the national increase of 6.1 percent.

In fact, health insurance premiums in California have increased at a far greater rate (86.3 percent) than overall California inflation (19.5 percent) since 2002. The cumulative increase has been greater in California than any other state in the nation, the survey reports.

"For decades we have seen health care costs increase, completely outstripping inflation," said Marion Mulkey, senior program officer for the California Healthcare Foundation.

Smaller businesses (less than 199 employees) are having the hardest time keeping up with the escalating rises in health care premiums. Small companies experienced an average increase of 10.1 percent, compared with 7.2 percent for large firms. Small firms were also more likely to experience large premium increases; 20 percent of small firm employees worked in companies that had a premium increase greater than 15 percent, compared with only 13 percent of employees working for large firms. Since most people in California work for small companies, these differences are significant.

"Small businesses are more diverse, and are less likely to offer coverage," said Mulkey. If small businesses do offer health insurance, it's a significant part of the employee expenses, she added. "The premiums they pay are higher, especially compared to bigger businesses."

The figures in the report cover only private industry, not public employers.
The probability of firms offering coverage varied widely, according to the survey, depending on whether they were lower-wage or higher-wage firms, whether they had many or fewer part-time workers, and whether part of their labor force had union workers. For example, only 35 percent of lower-wage California firms offered health benefits in 2007, versus 75 percent of higher-wage firms. Nevertheless, 63 percent of California's smaller companies (three to nine workers) provided coverage in 2007.
Of those that did not, the primary reason given for not offering coverage was the business was "too small." High premiums were also frequently given as a "very important" reason for not offering coverage.

One more thing: 30 percent of workers in small firms paid over half of the premium for family coverage, versus just 6 percent in large firms.

Employers in California, on average, contribute more to premiums for both single and family coverage than do employers in other states, the survey found. For family coverage, California employers contribute $9,194 while employers in other states contribute an average of $8,824 per family. And there's a north-south division in the state: California employers contributed significantly more toward premiums for family coverage in the San Francisco region than in the Los Angeles region ($10,265 vs. $8,455).

The role of employers is changing, as more employers are either asking their employees to pay more toward health care or the employers are reducing benefits.
Employers also are now asking for more employee cost sharing for health coverage. Deductibles have been increasing (28 percent of California workers had a deductible of $1,000 or more). Many covered workers also faced a separate copayment, coinsurance or both for each hospital admission, in addition to any general annual deductible.

The costs for individuals continue to go up. Fourteen percent of large employers in California reported that they are very likely to increase the amount employees pay for health insurance premiums in 2008, with another 22 percent being "somewhat likely" to do so.

But since 2004, fewer firms have viewed employee cost sharing as promising cost-containment measures, rather they are looking at a disease management approach to save costs.

California differed from other states in terms of covering same-sex domestic partners. In 2007, nearly seven of every 10 firms offered coverage to the partners — almost double the national rate.

HMOs are also big in California. Seventy-four percent of covered workers in all firms in California can choose an HMO as a plan type option, which nationally, only 42 percent could opt for an HMO.

Further information on the survey is available from the < a href="http://www.chcf.org">California HealthCare Foundation in Oakland.

—By Diana Diamond

Diana Diamond is the editor of the Healthcare Journal. You can reach her at diana@healthjournalnorcal.com.