Cough up more for health benefits
In Houston, employees' health insurance will increase 12 percent in 2011
By L.M. SIXEL
HOUSTON CHRONICLE
Oct. 25, 2010, 11:27PM
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Raises may be small and bonuses a distant memory of better times, but one workplace number isn't frozen: Employees can expect a double-digit percentage increase next year in the cost of health insurance they get through the office.
This year's health care overhaul combined with other factors will push the average cost per Houston employee to $4,946 next year — 12 percent more than this year — according to Aon Hewitt, a human resource consulting firm that tracks medical costs. The figure includes insurance premiums and insurance-related expenses such as co-pays and deductibles.
The firm surveyed 350 large employers nationwide, including 99 with offices in Houston.
The projected cost for Houston is $560 more than the U.S. average for 2011, according to Aon Hewitt. More than $500 of that difference stems from higher co-pays and deductibles for Houstonians.
Area residents pay higher out-of-pocket costs than workers in other cities partly because there are fewer unions in Houston to bargain benefits, said DeLayne Etheridge, a principal at Aon Hewitt who specializes in health care. Union members tend to pay less in co-pays and deductibles because of collective bargaining.
Also pushing local costs upward is Houston's higher-than-average proportion of residents without health insurance. Those who are insured often subsidize, through higher premiums, the cost of emergency room and other medical treatment for those who aren't.
Also, Etheridge said, Houston's world-class teaching and medical facilities provide higher-quality care, which carries a higher price.
Etheridge estimates provisions of the new health care law that already have taken effect — requirements such as allowing dependent children to stay on a parent's policy until age 26 and dropping the lifetime maximum for essential benefits — accounts for 1 percent to 2 percent of the overall increase.
Mercer, another human resources consulting firm, puts the figure at 2.3 percent.
Employers to pay more
It's not just employees who are feeling the squeeze of higher health care expenses. Businesses also face rising health bills.
Companies in Houston are looking at a tab of $10,221 to cover each employee next year, up 8.7 percent from 2010, according to Aon Hewitt. That figure represents an average of all plan types and includes both employee-paid and employer-paid insurance premiums or expected expenses for companies that self-insure.
HISD's two-tier plan
The Houston Independent School District is facing a 6 percent increase in costs for 2011, said Brad Bailey, general manager of employee benefits. After five years of keeping the lid on premiums, rising health care costs have caught up with the district, which insures 18,300 employees and their 8,300 dependents, he said.
To get better control over the biggest expenses — hospitalization, complicated tests, specialty drugs and some forms of chemotherapy — HISD divided its basic insurance plan into two tiers. Employees who agree to use lower-cost providers will pay less than those who use specialty hospitals.
Under the Tier 1 plan, employees who get care through Memorial Hermann Healthcare System, St. Luke's Episcopal Health System or Texas Children's Hospital will be responsible for 20 percent of their bills after paying a $1,750 deductible for individuals and $3,500 for families.
Tier 2 includes Methodist Hospital and M.D. Anderson Cancer Center. Employees who use those facilities will pay 35 percent after meeting a $2,000 deductible for individuals and $4,000 for families.
And while premiums stayed steady, school district employees will have to pay more out-of-pocket, including a new emergency room fee and a new deductible for prescription drugs.
Teachers are livid, said Joanna Pasternak, staff representative of the Houston Federation of Teachers, which has 7,100 members who sat on the HISD benefits committee until recently. The union walked out when HISD stopped allowing the union to participate in negotiating health care benefits.
"They want to be able to go to M.D. Anderson," said Pasternak, who said she wouldn't be alive today if she hadn't received treatment there.
Mike Barbour, partner in the health and benefits practice at Mercer in Houston, said many companies are turning to an option in the new legislation that allows them to delay new coverage mandates if they don't make substantive changes in plan design or raise employee costs beyond a certain level.
More than half of 1,091 employers that responded to a recent Mercer survey said they plan to use this grandfather provision to defer new benefit requirements such as full coverage for preventive services, including vaccines, mammograms, colonoscopies and full blood work-ups, said Barbour.
While the health care law has driven up costs, the sluggish economy is a bigger issue for many companies, he said. They don't have much of a financial cushion.
Audits, surcharges
It's not a trend yet, but Barbour said some companies are moving toward charging for each covered person when pricing health care. An employee covering a family of five, for example, would pay more than one covering only a spouse.
Etheridge said more employers are auditing to determine if dependents are eligible for coverage. Aon Hewitt estimates that more than 10 percent aren't — because, for example, a child lacks a legal relationship to the employee, or the employee isn't really married to a person claimed as a spouse.
Some companies also are adding surcharges for employees' working spouses to encourage the spouses to enroll in their own employers' plans, Etheridge said.
And companies are focusing more on employee wellness programs, said Christopher Fisher, chief innovation officer for BenefitSpecialists in Houston, which designs health insurance plans for its small and midsize clients.
Investing in walking programs, gym memberships and medical screenings is a long-term strategy, however, and is a challenge in this tough economic climate, Fisher said. It typically doesn't pay off immediately, but if employees with high blood pressure and high cholesterol can be diagnosed and treated early, a company can prevent a $50,000 to $70,000 heart attack or stroke.
One client, a nonprofit with 50 employees, launched a comprehensive wellness effort after it was hit with several years of double-digit health insurance increases. The results are in: a 5.5 percent reduction in premiums next year, Fisher said.
lm.sixel@chron.com
