As if the disappearing 401(k) match wasn’t depressing enough, brace yourself for a cut in another employer-provided benefit. It seems likely that employees will face a higher-than-usual increase in their share of paying for company-provided health insurance in 2010.
While rising health care costs aren’t exactly anything new-they have climbed about 6% annually in recent years-the recession is apparently driving up usage of health benefits in 2009 to the point that employers are going to push back big time in 2010 to control their bottom line.
Benefits consulting firm Mercer recently surveyed more than 400 firms and found that so far in 2009 health care costs have risen 7.4%, well above the “normal” 6% rate. In the survey report Mercer’s Linda Havlin posited a theory why recessions are lousy for our health, or at least health care costs:
“In past recessions we’ve seen an initial cost spike driven by stress-related illnesses, laid-off workers using benefits before their coverage ends and employees who anticipate changes in benefits. Knowing that coverage could end or be significantly changed is an incentive to ‘store up’ procedures and medications that could be unaffordable to an unemployed person.”
And it’s not as if recession-stressed companies have padding in their bottom lines to easily or happily absorb those higher costs. That’s set up a scenario in which the companies now say they are going to apply the screws in 2010 to keep costs in line; the goal is an average rate increase of 5.2% in 2010; if that materializes it will mark the lowest increase since 1997.
Mercer says consumer-directed health plans (CDHP) that pair a high deductible plan with a health savings account could become increasingly popular with employers in 2010. While just 14% of firms currently offer this type of coverage, Mercer says the percentage could double in 2010.
Employee premium costs are lower with a CDHP, but the tradeoff is that you are on the hook for a much higher deductible. Thus the importance of shoveling money into the savings account to cover the deductible and any co-insurance costs. Ultimately, you end up on the hook for a big portion of your health insurance. Short of meaningful health insurance reform out of Washington this year—and it is indeed on the front burner of the Obama administration-it looks like employers are going to ask employees to share more the health cost pain in 2010.
-- Carla Fried